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Part II, Item 8
MSFT 2003 FORM 10-K
30 /
Note 12—Investment Income/(Loss)
The components of investment income/(loss) are as follows:
(In millions)
Year Ended June 30 2001 2002 2003
Dividends $ 377 $ 357 $ 260
Interest 1,808 1,762 1,697
Net recognized gains/(losses) on investments:
Net gains on the sales of investments 3,175 2,379 909
Other-than-temporary impairments (4,804) (4,323) (1,148)
Net unrealized losses attributable to derivative instruments (592) (480) (141)
Net recognized gains/(losses) on investments (2,221) (2,424) (380)
Investment income/(loss) $ (36) $ (305) $ 1,577
Other than temporary impairments were recorded as follows for the three most recent fiscal years:
(In millions)
Year Ended June 30 2001 2002 2003
Due to general market conditions $ 1,692 $ 2,793 $ 943
Due to specific adverse conditions 3,112 1,530 205
Total Impairments $ 4,804 $ 4,323 $ 1,148
Note 13—Income Taxes
The provision for income taxes consisted of:
(In millions)
Year Ended June 30 2001 2002 2003
Current taxes:
U.S. and state $ 3,243 $ 3,644 $ 3,861
International 514 575 808
Current taxes 3,757 4,219 4,669
Deferred taxes 47 (535) 64
Provision for income taxes $ 3,804 $ 3,684 $ 4,733
U.S. and international components of income before income taxes were:
(In millions)
Year Ended June 30 2001 2002 2003
U.S. $ 9,189 $ 8,920 $ 11,346
International 2,336 2,593 3,380
Income before income taxes $ 11,525 $ 11,513 $ 14,726
In 2001, the effective tax rate was 33.0% and included the effect of a 3.1% reduction from the U.S. statutory rate for tax credits and a 1.1% increase for other
items. The effective tax rate in 2002 was 32.0% and included the effect of a 2.4% reduction from the U.S. statutory rate for the extraterritorial income exclusion tax
benefit and a 0.6% reduction for other items. The effective tax rate in 2003 was 32.1% and included the effect of a one-time benefit of $126 million from the
reversal of previously accrued taxes related to a favorable tax court ruling and a 2.0% reduction from the U.S. statutory rate for other items. Excluding this reversal,
the effective tax rate in 2003 would have been 33.0%.