SEC Comment Letter for MICROSOFT CORP (MSFT) (CIK 0000789019) (MSFT) — Dec 3, 2014
MICROSOFT CORP (MSFT) (CIK 0000789019)
Date: Dec. 3, 2014 · CIK: 0000789019 · Accession: 0000000000-14-061861
AI Filing Summary & Sentiment
Reasoning
Referenced dates: October 15, 2014, September 30, 2014
Letter
December 3, 2014 Via E -mail Frank H. Brod Corporate Vice President, Finance and Administration Microsoft Corporation One Microsoft Way Redmond, WA 98052 -6399
Re: Microsoft Corporation Form 10 -K for the Fiscal Year Ended June 30, 2014 Filed July 3 1, 2014 Form 10 -Q for the Quarterly Period Ended September 30, 2014 Filed October 23, 2014 File No. 000 -14278
Dear Mr. Brod:
We have reviewed your letter dated October 15, 2014 in connection with the above - referenced filing s and have the following comments. In some of our comments , we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advising us when you will provide the requested response. If you do not believe our comments apply to your facts and circumstance s or do not believe an amendment is appropriate, please tell us why in your response.
After reviewing any amendment to your filing and the information you provide in response to these comment s, we may have additional comments. Unless otherwise noted , where prior comments are referred to they refer to our letter dated September 30, 2014 .
Form 10 -K for the Fiscal Year Ended June 30, 2014
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Application of Cr itical Accounting Policies
Goodwill, page 47
1. We note your response to prior comment 4 indicating that you will include additional related disclosures if any of your reporting units are at risk of failing step one of the impairment test. If none of your reporting units are at risk of failing step one, please tell
Frank H. Brod Microsoft Corporation December 3, 2014 Page 2
us what consideration you gave to disclosing that conclusion. In addition, tell us whether the estimated fair values of any of your reporting units substantially exceed the carrying values, and consider disclosing any such determination. Tell us your threshold for determining that the excess is substantial.
Financial Statements and Supplementary Data
Notes to Financial Statements
Note 21 – Segment Information and Geographic Data, page 91
2. You indicate in response to prior comment 7 that you do not consider revenue from external customers attributed to any region to be material or to constitute a material concentration. Tell us how you define the regions you identified, and indicate whether such regions have experienced trends differently. Tell us what consideration you gave to discussing any known trends in your geographic mix including regions within Management’s Discussion and Analysis . For example, we note that Windows revenue is impac ted by differences in device market demand between developed markets and emerging markets , as noted from your disclosure on page 4, and e merging markets are a significant focus of your international growth strategy , as noted from your disclosure on page 23 . Further, we also note that you address geographic performance during your earnings calls. In addition to the risks associated with regulatory scrutiny in certain foreign countries and regions , tell us the other qualitative factors you considered for disaggregation of your discussion of revenue from other countries or regions. Refer to Section III.B.3 of SEC Release No. 33 -8350 .
3. We note your response to prior comment 8 that the disclosure of revenue from external customers attributable to significant products and service offerings is not intended to represent a rep ortable operating segment view and is presented on a consolidated or entity -wide view . In order to provide more clarity of your results of operations, consider defining each of your categor ies of significant products and services. In this regard, you should identify which of the significant products and service offerings included in your description of reportable segments and in your summary and segment results of operations discussion begi nning on page 30 are included in each line item of this footnote disclosure. It should be clear how the trends described in results of operations are represented in the changes in your significant products and service offerings table. For example, tell u s how the change in Microsoft Office system is addressed in your discussion of summary and segment results. Tell us where you addressed each of the factors contributing to the decline in Windows PC operating system that are partially offset by the increas e in Windows Commercial revenue .
Frank H. Brod Microsoft Corporation December 3, 2014 Page 3
Form 10 -Q for the Quarterly Period Ended September 30, 2014
Financial Information
Notes t o Financial Statements
Note 18 – Segment Information , page 27
4. Tell us what consideration you gave to reconciling the total amou nt disclosed for operating expenses by segment group to your total operating expenses that include integration and restructuring expenses. We refer you to ASC 280 -10-50-32(f). As the total operating expense s presented in the footnote is not the consolida ted amount, it appears to be a non -GAAP measure. Refer to Item 10(e)(1)(ii)(C) of Regulation S -K.
You may contact Melissa Walsh, Staff Accountant, at (202) 551 -3224 if you have questions regarding comments on the financial statements and related matters. If you have any other questions, please contact Gabriel Eckstein, Staff Attorney, at (202) 551 -3286 or Matthew Crispino, Staff Attorney, at (202) 551 -3456. If you require further assistance, do not hesitate to contact me at (202) 551 -3488.
Sincerely,
/s/ Stephen Krikorian
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December 3, 2014 Via E -mail Frank H. Brod Corporate Vice President, Finance and Administration Microsoft Corporation One Microsoft Way Redmond, WA 98052 -6399 Re: Microsoft Corporation Form 10 -K for the Fiscal Year Ended June 30, 2014 Filed July 3 1, 2014 Form 10 -Q for the Quarterly Period Ended September 30, 2014 Filed October 23, 2014 File No. 000 -14278 Dear Mr. Brod: We have reviewed your letter dated October 15, 2014 in connection with the above - referenced filing s and have the following comments. In some of our comments , we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advising us when you will provide the requested response. If you do not believe our comments apply to your facts and circumstance s or do not believe an amendment is appropriate, please tell us why in your response. After reviewing any amendment to your filing and the information you provide in response to these comment s, we may have additional comments. Unless otherwise noted , where prior comments are referred to they refer to our letter dated September 30, 2014 . Form 10 -K for the Fiscal Year Ended June 30, 2014 Management’s Discussion and Analysis of Financial Condition and Results of Operations Application of Cr itical Accounting Policies Goodwill, page 47 1. We note your response to prior comment 4 indicating that you will include additional related disclosures if any of your reporting units are at risk of failing step one of the impairment test. If none of your reporting units are at risk of failing step one, please tell Frank H. Brod Microsoft Corporation December 3, 2014 Page 2 us what consideration you gave to disclosing that conclusion. In addition, tell us whether the estimated fair values of any of your reporting units substantially exceed the carrying values, and consider disclosing any such determination. Tell us your threshold for determining that the excess is substantial. Financial Statements and Supplementary Data Notes to Financial Statements Note 21 – Segment Information and Geographic Data, page 91 2. You indicate in response to prior comment 7 that you do not consider revenue from external customers attributed to any region to be material or to constitute a material concentration. Tell us how you define the regions you identified, and indicate whether such regions have experienced trends differently. Tell us what consideration you gave to discussing any known trends in your geographic mix including regions within Management’s Discussion and Analysis . For example, we note that Windows revenue is impac ted by differences in device market demand between developed markets and emerging markets , as noted from your disclosure on page 4, and e merging markets are a significant focus of your international growth strategy , as noted from your disclosure on page 23 . Further, we also note that you address geographic performance during your earnings calls. In addition to the risks associated with regulatory scrutiny in certain foreign countries and regions , tell us the other qualitative factors you considered for disaggregation of your discussion of revenue from other countries or regions. Refer to Section III.B.3 of SEC Release No. 33 -8350 . 3. We note your response to prior comment 8 that the disclosure of revenue from external customers attributable to significant products and service offerings is not intended to represent a rep ortable operating segment view and is presented on a consolidated or entity -wide view . In order to provide more clarity of your results of operations, consider defining each of your categor ies of significant products and services. In this regard, you should identify which of the significant products and service offerings included in your description of reportable segments and in your summary and segment results of operations discussion begi nning on page 30 are included in each line item of this footnote disclosure. It should be clear how the trends described in results of operations are represented in the changes in your significant products and service offerings table. For example, tell u s how the change in Microsoft Office system is addressed in your discussion of summary and segment results. Tell us where you addressed each of the factors contributing to the decline in Windows PC operating system that are partially offset by the increas e in Windows Commercial revenue . Frank H. Brod Microsoft Corporation December 3, 2014 Page 3 Form 10 -Q for the Quarterly Period Ended September 30, 2014 Financial Information Notes t o Financial Statements Note 18 – Segment Information , page 27 4. Tell us what consideration you gave to reconciling the total amou nt disclosed for operating expenses by segment group to your total operating expenses that include integration and restructuring expenses. We refer you to ASC 280 -10-50-32(f). As the total operating expense s presented in the footnote is not the consolida ted amount, it appears to be a non -GAAP measure. Refer to Item 10(e)(1)(ii)(C) of Regulation S -K. You may contact Melissa Walsh, Staff Accountant, at (202) 551 -3224 if you have questions regarding comments on the financial statements and related matters. If you have any other questions, please contact Gabriel Eckstein, Staff Attorney, at (202) 551 -3286 or Matthew Crispino, Staff Attorney, at (202) 551 -3456. If you require further assistance, do not hesitate to contact me at (202) 551 -3488. Sincerely, /s/ Stephen Krikorian Stephen Krikorian Accounting Branch Chief