1: what are the factors that likely explain the difference between microsoft’s market value of equity and its reported book value of equity? it is observed that the factors which are responsible for the difference between the market value of the equity and the book value of the equity were the non-recording of the intangible assets correctly, i.e. on the other hand, it was noted that the microsoft’s policy of moderate and conservative accounting policies and procedures also has a negative effect on the company’s book value of the equity. on the other hand, the book value was recorded on the basis of identified residual and remaining interest left to the shareholders and members of the company after subtracting payables, as the claim that the creditors must be on top.
on the other hand, the higher asset turnover ratio was more associated on the influence of cash flow. estimate the effect of capitalizing software costs on microsoft’s fiscal 1997, 1998, and 1999 income statements and balance sheets. on the other hand, the capitalized cost must be amortized on the basis of the future and current revenues. examines the overall financial strategy of the company microsoft, studying accounting treatment of the company of the two accounting issues – software capitalization and revenue recognition. provides a forum to discuss the possible causes of accounting and disclosure choices microsoft, and also discusses the recent investigation by the securities and exchange commission in the microsoft practice of accounting.
the inability of microsoft to report the intangible assets and the conservative accounting policies are the root causes of the difference between market and book value of equity. a close look at the balance sheet of microsoft reveals that the intangible asset’s portion does not report the value of brands, customer loyalty and most importantly the human capital. hence, essentially, the absence of these intangible assets renders a huge difference between the market capitalization and the equity value. additionally, the conservative policies of revenue recognition defer the earnings. as depicted by the analysis, the net profit on the income statement will decrease in the prescribed time. additionally, the reported retained earnings balance on bs will also be less.
however, the policy of microsoft reported that the guidelines provided by fasb have no material effect in the financial statements. moreover, microsoft could also have projected the useful life of their products to be short-lived. as a result of the change in the revenue recognition policy, the revenue will change by 6.19%, 7.19%, 9.63%, and 6.84% respectively in the year 1996, 1997, 1998 and 1999. the first and foremost motive behind the deferral of the revenue arises from the notion of ‘smoothing out’ of the revenues. the frictional increase in the revenues will post huge revenue on the balance sheet. hence, the shrewd step to defer the revenue may be related to the idea of smoothing out the balance sheet and income statement. hence, in this situation, the recognition of the entire revenue base will be inconsistent with the accrual concept of accounting. our essay writing services are the best in the world.
explores microsoft’s overall financial reporting strategy by examining the company’s treatment of two accounting issues–software capitalization and revenue examines the overall financial strategy of the company microsoft, studying accounting treatment of the company of the two accounting issues – software explores microsoft’s overall financial reporting strategy by examining the company’s treatment of two accounting issues–software capitalization, microsoft financial reporting strategy case solution, microsoft revenue recognition case analysis, microsoft revenue recognition case analysis, microsoft accounting case study, financial reporting issues at microsoft corp.
microsoft overall financial strategy was very conservative with respect to revenues and cash balance. the company keep its cash and short-term investment accounts large enough, is that the company could easily pay its payrolls and other operating expenses. buy and download microsoft’s financial reporting strategy case solution and case analysis. get access within 2 minutes. price $19. microsoft’s financial reporting strategy can be considered as conservative. microsoft used this strategy to deliberately manipulate and maintain steady flow of remarkable: microsoft financial reporting strategy. assignment questions on teaching and new perspective, the birthday of legendary pink floyd., microsoft revenue recognition policy, interim financial statements. what effect did microsoft’s revenue recognition policy have on its financial statements? what are the factors that likely explain the difference between microsoft’s market value of equity and its reported book value of equity? why do you think microsoft decided to defer a portion of its revenues in fiscal 1996? what are financial reporting processes?
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