Segment Information

9 Months Ended

Mar. 31, 2013

Segment Information

NOTE 16 — SEGMENT INFORMATION

In its operation of the business, management, including our chief operating decision maker, the company’s Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements prepared on a basis not consistent with U.S. GAAP. The segment information within this note is reported on that basis. Our five segments are Windows Division, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices Division. During the three months ended December 31, 2012, we changed the name of our Windows & Windows Live Division to Windows Division.

Due to the integrated structure of our business, certain revenue earned and costs incurred by one segment may benefit other segments. Revenue on certain contracts may be allocated among the segments based on the relative value of the underlying products and services. Costs that are identifiable are allocated to the segments that benefit to incent cross-collaboration among our segments so that one segment is not solely burdened by the cost of a mutually beneficial activity. Allocated costs may include those relating to development and marketing of products and services from which multiple segments benefit, or those costs relating to services performed by one segment on behalf of other segments. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated.

In addition, certain costs incurred at a corporate level that are identifiable and that benefit our segments are allocated to them. These allocated costs include costs of: field selling; employee benefits; shared facilities services; and customer service and support. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated. Certain other corporate-level activity is not allocated to our segments, including costs of: broad-based sales and marketing; product support services; human resources; legal; finance; information technology; corporate development and procurement activities; research and development; legal settlements and contingencies; and employee severance.

We have recast certain prior period amounts within this note to conform to the way we internally managed and monitored segment performance during the current fiscal year, reflecting immaterial movements of business activities between segments and changes in cost allocations.

Segment revenue and operating income (loss) were as follows during the periods presented:

(In millions)	Three Months Ended March 31,						Nine Months Ended March 31,
	2013			2012			2013			2012
Revenue
Windows Division	$	4,614		$	4,614		$	14,268		$	14,166
Server and Tools		5,043			4,534			14,789			13,491
Online Services Division		851			725			2,457			2,181
Microsoft Business Division		6,130			5,838			18,304			17,752
Entertainment and Devices Division		2,145			1,612			8,233			7,819
Unallocated and other		1,706			84			(98	)		255
Consolidated	$	20,489		$	17,407		$	57,953		$	55,664
Operating income (loss)
Windows Division	$	2,369		$	2,960		$	7,849		$	9,054
Server and Tools		1,981			1,692			5,855			5,214
Online Services Division		(263	)		(476	)		(904	)		(1,445	)
Microsoft Business Division		3,911			3,792			12,112			11,667
Entertainment and Devices Division		(6	)		(232	)		944			642
Reconciling amounts		(380	)		(1,362	)		(5,165	)		(3,561	)
Consolidated	$	7,612		$	6,374		$	20,691		$	21,571

Reconciling amounts in the tables above and below include adjustments to conform our internal accounting policies to U.S. GAAP and corporate-level activity not specifically attributed to a segment. Significant internal accounting policies that differ from U.S. GAAP relate to revenue recognition, income statement classification, and depreciation.

Significant reconciling items were as follows:

(In millions)	Three Months Ended March 31,						Nine Months Ended March 31,
	2013			2012			2013			2012
Corporate-level activity (a)	$	(2,010	)	$	(1,380	)	$	(4,923	)	$	(3,640	)
Revenue reconciling amounts (b)		1,641			8			(286	)		60
Other		(11	)		10			44			19
Total	$	(380	)	$	(1,362	)	$	(5,165	)	$	(3,561	)

(a) Corporate-level activity excludes revenue reconciling amounts presented separately in that line item.

(b) Revenue reconciling amounts for the three months ended March 31, 2013 includes the recognition of: $1.1 billion of previously deferred revenue related to the Windows Upgrade Offer; $380 million of previously deferred revenue related to the sales of video games with the right to receive specified software upgrades/enhancements; $101 million of previously deferred revenue related to pre-sales of the new Office to original equipment manufacturers and retailers before general availability; and a net $92 million of previously deferred revenue related to the Office Upgrade Offer.

Revenue reconciling amounts for the nine months ended March 31, 2013 includes a net $784 million of revenue deferred related to the Office Upgrade Offer and the recognition of $540 million of previously deferred revenue related to the Windows Upgrade Offer.

Assets are not allocated to segments for internal reporting presentations. A portion of amortization and depreciation is included with various other costs in an overhead allocation to each segment, and it is impracticable for us to separately identify the amount of amortization and depreciation by segment that is included in the measure of segment profit or loss.