Microsoft 2004 Annual Report Download - page 47

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PAGE 47
The $1.7 billion increase in goodwill during fiscal 2003 related principally to the following acquisitions: Navision a/s with
$1.2 billion allocated to Microsoft Business Solutions; $281 million for the Rare Ltd. acquisition allocated to Home and
Entertainment; and Placeware, Inc. with $180 million allocated to Information Worker.
NOTE 9 INTANGIBLE ASSETS
The components of finite-lived intangible assets are as follows:
(In millions)
Year Ended June 30 2003 2004
Gross carrying
amount
A
ccumulated
amortization
Net carrying
amount
Gross carrying
amount
Accumulated
amortization
Net carrying
amount
Contract-based $584 $(376) $208 $ 908 $(476) $ 432
Technology-based 261 (137) 124 278 (183) 95
Marketing-related 34 (9) 25 35 (19) 16
Customer-related 28 (1) 27 30 (4) 26
Total $907 $(523) $384 $1,251 $(682) $ 569
During fiscal 2004, we recorded additions to intangible assets of $355 million, of which $266 million was related to a
comprehensive intellectual property license that we received in conjunction with the settlement of InterTrust v. Microsoft.
No other material intangibles were acquired in fiscal 2004. During fiscal 2003, we recorded additions to intangible assets
of $306 million, primarily related to the acquisition of Navision a/s and Rare Ltd., as described at Note 15 – Acquisitions.
The components of intangible assets acquired during fiscal 2003 and 2004 are as follows – no significant residual value is
estimated for these assets:
(In millions)
Y
ear Ended June 30 2003 2004
A
mount Weighted
average life
Amount Weighted
average life
Contract-based $162 5 years $ 324 9 years
Technology-based 97 4 years 28 4 years
Marketing-related 19 4 years – –
Customer-related 28 9 years 3 3 years
Total $306 5 years $ 355 9 years
During 2003, research and development assets of $17 million were acquired and written off in accordance with FASB
Interpretation No. 4 (FIN 4), Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the
Purchase Method. Those write-offs are included in Research and Development expenses.
Acquired finite-lived intangibles are generally amortized on a straight line basis over weighted average periods.
Intangible assets amortization expense was $161 million for fiscal 2003 and $170 million for fiscal 2004. The estimated
future amortization expense related to intangible assets as of June 30, 2004 is as follows:
(In millions)
June 30
A
mount
2005 $ 154
2006 104
2007 81
2008 62
2009 38
Total $ 439