Microsoft 2006 Annual Report Download - page 55

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PAGE 54
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Acquired intangibles are generally amortized on a straight-line basis over weighted average periods. Intangible assets
amortization expense was $127 million for fiscal year 2006, $161 million for fiscal year 2005, and $170 million for fiscal year
2004. The estimated future amortization expense related to intangible assets as of June 30, 2006 is as follows:
(In millions)
Y
ear Ended June 30
A
mount
2007
$150
2008
126
2009
83
2010
60
2011
46
Total
$465
NOTE 10 INCOME TAXES
The components of the provision for income taxes were as follows:
(In millions)
Y
ear Ended June 30
2006
2005
2004
Current taxes:
U.S. Federal
$4,47
1
$3,401
$3,766
U.S. State and Local
10
1
152
174
International
882 911
1,056
Current taxes
5,454 4,464
4,996
Deferred taxes (benefits)
209 (90)
(968)
Provision for income taxes
$5,663 $4,374
$4,028
U.S. and international components of income before income taxes were as follows:
(In millions)
Y
ear Ended June 30
2006
2005
2004
U.S.
$11,404 $ 9,806
$
8,088
International
6,858 6,822
4,108
Income before income taxes
$18,262 $16,628
$12,196
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for
income taxes were as follows:
Y
ear Ended June 30
2006
2005
2004
Federal statutory rate
35.0% 35.0%
35.0%
Effect of:
Foreign earnings taxed at lower rates
(4.6)% (3.1)%
(1.7)%
Examination settlements
(0.6)% (4.7)%
–
Other reconciling items
1.2% (0.9)%
(0.3)%
Effective rate
31.0% 26.3%
33.0%
The 2006 other reconciling items includes the impact of the $351 million non-deductible European Commission fine. The 2005
other reconciling items include a $179 million repatriation tax benefit under the American Jobs Creation Act of 2004. The 2004
other reconciling items include the $208 million benefit from the resolution of an issue remanded by the Ninth Circuit Court of
Appeals and the impact of the $605 million non-deductible European Commission fine.