Microsoft – Accounting Analysis Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Microsoft – Accounting Analysis Case Study Analysis

Potential Red Flags:

There appears to be an increasing gap between the cash flow for operations and net income earned which indicates that the organization might have overstated accruals in order to achieve tax incentives and save cash. However, it is believed that the accruals increased to 5922 million U.S. dollars from 3820 million U.S dollars in the year 2017 due to a rise of 10 percent in the cloud-based services and other licensing arrangements.

Moreover, the accounts receivable and inventory has been an increase in line with sales, the research and development expenditure rose by 10% due to investment in cloud engineering which is evident by the increase in intangible assets amounting to 888 million U.S. dollars and rise in depreciation and amortization of 17 percent.

The unexpected large receivable write-offs in the last year were explained by the adoption of the new standard pertaining to revenue recognition. In addition, a qualified audit opinion has been provided which indicates that the organization’s reported earnings reflect its true economic performance as detailed disclosure for unusual changes and each line of the item has been provided and comply with the accounting policies of the organization. (Microsoft Annual Report, 2018)

Conclusion:

It is concluded that the organization’s financial statements and reported earnings reflect the underlying economic performance of the business as the audit report is qualified, explanations for odd entries and unusual changes have been included in the notes to the financial statements along with information related to accounting policies, changes in accounting estimates and off-balance sheet items.............................

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