For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
April 22 — Microsoft Corp. reported a $600 million increase in “tax contingencies and other income tax liabilities” during its 2016 fiscal year—an increase mainly due to transfer pricing adjustments, according to a filing with the Securities and Exchange Commission.
The software giant's tax contingencies and liabilities were $12.7 billion as of March 31, 2016, compared with $12.1 billion on June 30, 2015. The company said the increase was due “primarily to current period quarterly growth relating to intercompany transfer pricing adjustments.”
That growth was offset by a previously announced partial settlement with the IRS over its 2007-09 tax years. The company said transfer pricing is the primary unresolved issue over audits from its 2004-09 tax years.
Microsoft is currently involved in litigation with the Internal Revenue Service, over the company's Freedom of Information Act requests for documents relating to its audit (59 DTR K-3, 3/28/16).
New Accounting Standard
Microsoft said its 24 percent effective tax rate for the three-month quarter ending March 31 was due in part to the adoption of a new accounting standard that treats excess tax benefits from stock-based compensation as part of income tax expense, rather than additional paid-in capital.
Microsoft chose to adopt Financial Accounting Standards Board guidance early, requiring the company to reflect any adjustments prior to July 1 and causing it to revise earnings results from the previous two quarters, according to the filing.
The standard, which is part of FASB's effort to simplify accounting, requires companies to record excess tax benefits and tax deficiencies in the reporting period that the award vests.
Multinationals including Google Inc., Apple Inc. and Goldman Sachs Group Inc. criticized the change. Some opponents of the rule said recording the stock compensation and associated taxes as income could lead to unnecessary earnings swings (63 DTR G-2, 4/1/16).
Microsoft Chief Financial Officer Amy E. Hood told investors April 21 she expects the company's full-year tax rate—for the fiscal year ending in June 2016—will be between 20 percent and 21 percent.
To contact the reporters on this story: Alex M. Parker in Washington at email@example.com and Laura Davison in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Molly Moses at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)