The Business Analysis Of Leading Player Microsoft Case Study Solution
Slide 03:
There are various transactions which are undertaken by Microsoft such as research and development, and sale of licenses to customers.The company does not expense the cost associated with the development of software until the technology feasibility is achieved and the cost associated with the development of software is capitalized after the technological feasibility is reached. The company use percentage of completion method or record revenue as the recoverable cost incurred in the reported period. Moreover, the accounting strategy of Microsoft involves the likelihood of the figure manipulation through understating the research expenditures, overstate revenue by purposely recording the unearned liability as revenues or fail to record the cost associated with the revenue earned in the period the service or product is offered to reflect strong business performance and increase the share price.
Slide 04:
Microsoft provides disclosures through investor presentations, media interviews and extensive Information on Microsoft’s Website and the key success factors of the organization can easily be measured as a result of detailed information disclosed by the management. Taking into consideration some potential red flags, there might be anincreasing gap between the cash flow for operations and net income earned which demonstrates that the organization might have overstated accruals in order to achieve tax incentives and save cash. Not only this, the unexpected large receivable write-offs in the last financial year were explained by the adoption of the new standard pertaining to revenue recognition....................................
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