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Microsoft reports $22.6B in Q4 revenue

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Re: Microsoft reports $22.6B in Q4 revenue

#31

Post by sbuttgereit »

droshelovich wrote: post #22
TheSpiceIsLife wrote: post #16

Earlier quoted context omitted.

Right. I had to look up what GAAP means so I could understand non-GAAP. GAAP - Generally Accepted Accounting Principles So what then is non-GAAP? But lack of standardization in these calculations, plus the potential for creative accounting, make it difficult to draw relevant comparisons among companies or draw meaningful conclusions from these statistics. [1] Riiiiiiight. It the article was from a financially oriente…

In this case, "Non-GAAP" means an earnings/revenue figure that the company produced itself. Companies usually claim this reflects economic reality but keep in mind they are free to cook up whatever numbers they want. GAAP would mean figures that adhere to general accounting rules, which independent auditors help confirm. Generally, "Non-GAAP" can mean either IFRS or Cash Basis Accounting Basically: GAAP - Generally A…

The only trouble I have with what you've said are in your examples for cash basis vs. accrual. Even on a cash basis I have to depreciate capital goods over time. The capital asset still has value regardless of my accounting method, so in a sense I've converted the cash (an asset) into a machine (another kind of asset). I still expense over time under the cash method because I'm representing things like wear and obsolescence rather than showing the commitment to an expense vs. the actual settlement of that commitment.

I think it's easier to demonstrate on the revenue side: if I sell a customer something and give them 30 days to pay, under the cash method I don't record the sale until I actually receive the cash whereas under the accrual method I record the sale when I invoice the customer: in the cash basis Accounts Receivable is basically a non-booking account and under the accrual method Accounts Receivable is an asset account. (Note I'm ignoring issues of deferred revenue :-) ).

I do think your definitions are sound.

Note: there are some U.S. tax rules about the first $X yearly capital purchases being immediately depreciable each year (though it's a relatively small amount).

Re: Microsoft reports $22.6B in Q4 revenue

#32

Post by ghaff »

chx wrote: post #9

I absolutely hate these confusing words. It is alongside of "surname" and "last name" -- why can't you just use "family name" and "given name". While I understand an investor report needs to be precise the articles about it needs to use terms people understand. Like "this is how much money came in the doors" -- aka. income. I believe the word "revenue" is used for what a layperson would call "income" and "income" is…

The confusing words you hate are pretty much standard terms in every earnings press release ever written.

Re: Microsoft reports $22.6B in Q4 revenue

#33

Post by Dwolb »

forgetsusername wrote: post #27
JumpCrisscross wrote: post #24

Earlier quoted context omitted.

> adds back such items as Windows 10 deferrals to revenue What does this mean? Are Microsoft counting people who haven't upgraded as if they have upgraded?

> What does this mean? It sounds like they are deferring some of the revenue from licenses sold with the intention of booking it over the life of the OS, as "free" updates are released.

It might mean the opposite.

GAAP rulea may dictate they book the revenue over the life of the OS to better match liabilities in the form of updates. MSFT want to book all the revenue now as an "economic reality".

It sounds like they're also claiming restructurings of their phone hardware division was a "one time charge" and removing those expenses, again, to better represent the "economic reality".

Re: Microsoft reports $22.6B in Q4 revenue

#34

Post by nrh »

JumpCrisscross wrote: post #24
julsimon wrote: post #6

Not according to GAAP rules... http://www.zerohedge.com/news/2016-07-19/microsoft-misses-ga...

> adds back such items as Windows 10 deferrals to revenue What does this mean? Are Microsoft counting people who haven't upgraded as if they have upgraded?

it seems to come down to two main points, as far as consumer tech companies go:

1. GAAP says that revenue from a software service subscription (e.g. cloud service) can only be counted as revenue once the service has been delivered, not at time of sale.

http://www.marketwatch.com/story/ea-to-ease-non-gaap-usage-a...

http://www.grayboxpdx.com/blog/post/revenue-recognition-for-...

2. Equity-based compensation is accounted for as a cost.

http://mercercapital.com/financialreportingblog/equity-based...

Re: Microsoft reports $22.6B in Q4 revenue

#35

Post by allengeorge »

bearbin wrote: post #2

The headline is very confusing - "Microsoft beats Wall Street predictions with $22.6B revenue" would be a better choice.

Really? "Street" is a pretty common term for Wall Street (aka. the consensus opinion of analysts) I've definitely seen it for years.

Re: Microsoft reports $22.6B in Q4 revenue

#36

Post by allengeorge »

chx wrote: post #9

I absolutely hate these confusing words. It is alongside of "surname" and "last name" -- why can't you just use "family name" and "given name". While I understand an investor report needs to be precise the articles about it needs to use terms people understand. Like "this is how much money came in the doors" -- aka. income. I believe the word "revenue" is used for what a layperson would call "income" and "income" is…

You're complaining about them using words like "revenue" and "income" in the way they're meant to be used in accounting? That's...puzzling. Even surname (which you seem to dislike) is a pretty common word.

Not everything has to be immediately accessible; every field has terminology we have to be aware of when entering it - and that's not a bad thing.

Re: Microsoft reports $22.6B in Q4 revenue

#37

Post by dingo_bat »

slededit wrote: post #20
sdrothrock wrote: post #8

Earlier quoted context omitted.

> Not sure if this qualifies as an achievement. Too many questions would perhaps suggest that things aren't quite obvious. > Wish I had a Windows box to play around and see what Cortana looks like. A variant of Clippy? Your comment suggests that you don't know what Cortana is, so I'm not sure how you're coming to the conclusion that "Too many questions would perhaps suggest that things aren't quite obvious." Cortana…

Start menu searches are also cortana searches.

Start menu searches are not "asking Cortana questions".

Re: Microsoft reports $22.6B in Q4 revenue

#38

Post by samfisher83 »

Dwolb wrote: post #29
droshelovich wrote: post #15

Earlier quoted context omitted.

GAAP is basically a huge bundle of compromises between corporations and the FASB. In reality, "revenue" and "income" don't really have rigourous definitions. Quarterly figures are also often adjusted in subsequent periods. Unfortunately, many websites simply gloss over this fact and just report the stated numbers.

I had a financial accounting professor who would recount the quote, "Profit is an opinion, but cash is a reality." The 10k's we would go over took a lot of analysis to understand financially and operationally if the company is in good shape based on the stated numbers.

Definitely not true. You can manipulate cash flow. For example you can give your customer a sweet heart deal where you give your customer a massive discounts on future orders for upfront payment you get a lot of cash the current q, but you are hurting yourself in future q. You can also increase you ap and make cash flow better.you can also pay employees with stock and increase cash flow, but decrease share holder value.

Re: Microsoft reports $22.6B in Q4 revenue

#39

Post by forgetsusername »

Dwolb wrote: post #33
forgetsusername wrote: post #27

Earlier quoted context omitted.

> What does this mean? It sounds like they are deferring some of the revenue from licenses sold with the intention of booking it over the life of the OS, as "free" updates are released.

It might mean the opposite. GAAP rulea may dictate they book the revenue over the life of the OS to better match liabilities in the form of updates. MSFT want to book all the revenue now as an "economic reality". It sounds like they're also claiming restructurings of their phone hardware division was a "one time charge" and removing those expenses, again, to better represent the "economic reality".

>GAAP rulea may dictate they book the revenue over the life of the OS to better match liabilities in the form of updates. MSFT want to book all the revenue now as an "economic reality".

I think you might be right; the revenue should be deferred over the life of Windows 10, but their non-GAAP measure books it up front. Hence the top line beat.

Not a particularly heinous accounting maneuver.

Re: Microsoft reports $22.6B in Q4 revenue

#40

Post by xyzzy4 »

droshelovich wrote: post #22
TheSpiceIsLife wrote: post #16

Earlier quoted context omitted.

Right. I had to look up what GAAP means so I could understand non-GAAP. GAAP - Generally Accepted Accounting Principles So what then is non-GAAP? But lack of standardization in these calculations, plus the potential for creative accounting, make it difficult to draw relevant comparisons among companies or draw meaningful conclusions from these statistics. [1] Riiiiiiight. It the article was from a financially oriente…

In this case, "Non-GAAP" means an earnings/revenue figure that the company produced itself. Companies usually claim this reflects economic reality but keep in mind they are free to cook up whatever numbers they want. GAAP would mean figures that adhere to general accounting rules, which independent auditors help confirm. Generally, "Non-GAAP" can mean either IFRS or Cash Basis Accounting Basically: GAAP - Generally A…

Non-GAAP lets executives create nicer Power Point presentations.
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