Case Study Discussion Questions
1- What is the trend for the unearned revenue balance over time?What could be causing this?
2- What is the trend for revenue and net income over time?
What effect did Microsoft’s software capitalization policy have on 3- its financial statements?
Speculate as to why Microsoft chose to expense all software costs as incurred rather than capitalizing a portion
of those costs.
4- What effect did Microsoft’s revenue recognition policy have on its financial statements?
Speculate as to why Microsoft decided to defer a portion of its revenues in fiscal year 1996.
5- In your opinion, did Microsoft provide its analysts’ with information that was intentionally overly pessimistic?
Are there benefits to the company being outwardly pessimistic about its future prospects?
6- Describe Microsoft’s overall financial reporting strategy. Why had the company adopted this strategy and
why was the SEC concerned about it?
7- Describe 2 concepts you learned from this case study
Sample Solution
