Microsoft 2004 Annual Report Download - page 46

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PAGE 46
NOTE 6 INVENTORIES
(In millions)
Y
ear Ended June 30 2003 2004
Finished goods $393
$ 271
Raw materials and work in process 247 150
Inventories $640 $ 421
We recorded lower of cost or market adjustments totaling approximately $90 million in fiscal 2004.
NOTE 7 PROPERTY AND EQUIPMENT
(In millions)
Y
ear Ended June 30 2003 2004
Land $ 248
$ 274
Buildings and improvements 1,854 1,981
Leasehold improvements 768 805
Computer equipment and software 2,464 2,637
Furniture and equipment 744 792
Property and equipment, at cost 6,078 6,489
Accumulated depreciation (3,855) (4,163)
Property and equipment, net $ 2,223 $ 2,326
Property and equipment are stated at cost. Depreciation is computed principally on the straight-line method over the
estimated useful lives of the assets. The useful lives for buildings range from five to fifteen years, leasehold improvements
range from the shorter of five years or applicable lease term, computer equipment and software range from two to three
years, and furniture and equipment range from one to five years. Land is not depreciated.
During fiscal 2002, 2003, and 2004, depreciation expense was $820 million, $929 million, and $647 million, the majority
of which related to computer equipment.
NOTE 8 GOODWILL
Changes in the carrying amount of goodwill for fiscal 2003 and 2004 by segment, are as follows:
(In millions)
Balance as of
June 30,
2002
A
cquisitions
/ purchase
accounting
adjustments
Balance as of
June 30,
2003
A
cquisitions
/ purchase
accounting
adjustments Divestitures
Balance as of
June 30,
2004
Client $ 26 $ 11 $ 37 $ – $ –
$ 37
Server and Tools 97 9 106 – – 106
Information Worker – 180 180 (2) –
178
Microsoft Business Solutions 1,021 1,198 2,219 7 (19) 2,207
MSN 160 (6) 154 – – 154
Mobile and Embedded Devices 5 23 28 2 –
30
Home and Entertainment 117 287 404 (1) – 403
Total $1,426
$1,702 $3,128 $ 6 $(19) $3,115
We test goodwill for impairment annually during the first quarter of each fiscal year at the reporting unit level using a fair
value approach, in accordance with the provisions of SFAS 142. Our annual testing resulted in no impairment charges to
goodwill in fiscal 2003 and 2004. If an event occurs or circumstances change that would more likely than not reduce the
fair value of a reporting unit below its carrying value, goodwill will be evaluated for impairment between annual tests.
During fiscal 2004, we had no material acquisitions. Goodwill decreased $13 million primarily as a result of goodwill
allocated to a business that was divested in the current year.