8-KFinancial EventsExhibits & Filings

MICROSOFT CORP 8-K Report, Material Impairment (Jul 2, 2012)

Filed July 2, 2012For Securities:MSFT

Summary

Microsoft Corporation (MSFT) announced a significant non-cash charge of approximately $6.2 billion related to the impairment of goodwill within its Online Services Division. This charge is expected to be recognized in the quarter ending June 30, 2012. The company's assessment, conducted during its annual goodwill impairment testing, indicates that while the Online Services Division has shown improvement, future growth and profitability expectations have been revised downwards compared to previous estimates. This substantial goodwill impairment signals a reassessment of the long-term value and potential of Microsoft's online ventures. Investors should closely monitor the performance and strategic direction of the Online Services Division following this announcement. While the charge is non-cash and non-tax-deductible, it represents a material write-down of assets and may impact reported earnings per share for the period.

Key Highlights

  • 1Microsoft will record a non-cash goodwill impairment charge of approximately $6.2 billion.
  • 2The impairment charge pertains to the Online Services Division.
  • 3The charge is expected to be recognized in the fiscal quarter ending June 30, 2012.
  • 4The impairment resulted from updated expectations for future growth and profitability in the Online Services Division.
  • 5This is a non-tax-deductible charge.
  • 6The company concluded this impairment during its annual goodwill impairment testing.
  • 7A press release detailing this charge was issued on July 2, 2012, and attached as an exhibit.

Frequently Asked Questions

The primary financial impact is a non-cash charge of approximately $6.2 billion recognized in the fiscal quarter ending June 30, 2012. While it does not affect cash flow directly, it will reduce reported net income and earnings per share for that period. It is also noted as non-tax-deductible.

Microsoft concluded that the carrying value of goodwill in its Online Services Division exceeds its fair value. This is due to a reassessment of future growth and profitability expectations for this division, which are now lower than previously estimated, despite recent business improvements.

No, this is a non-cash charge. It represents an accounting adjustment to reflect a decrease in the value of an intangible asset (goodwill) on the balance sheet and does not involve an outflow of cash.

The 'Online Services Division' likely encompasses Microsoft's various internet-based services and products, which could include areas like Bing search, MSN, and other online advertising and service platforms, as of the filing date in 2012.