Microsoft 2007 Annual Report Download - page 32

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PAGE 31
We account for product warranties in accordance with SFAS No. 5, Accounting for Contingencies. We provide
for the estimated costs of hardware and software warranties at the time the related revenue is recognized. For
hardware warranty, we estimate the costs based on historical and projected product failure rates, historical and
projected repair costs, and knowledge of specific product failures (if any). The specific hardware warranty terms
and conditions vary depending upon the product sold and country in which we do business, but generally include
technical support, parts, and labor over a period generally ranging from 90 days to three years. For software, we
estimate the costs to provide bug fixes, such as security patches, over the life of the software. We regularly
reevaluate our estimates to assess the adequacy of the recorded warranty liabilities and adjust the amounts as
necessary.
Statement of Management’s Responsibility for Financial Statements
Management is responsible for the preparation of the consolidated financial statements and related information
that are presented in this report. The consolidated financial statements, which include amounts based on
management’s estimates and judgments, have been prepared in conformity with accounting principles generally
accepted in the United States of America.
The Company maintains accounting and internal control systems to provide reasonable assurance at
reasonable cost that assets are safeguarded against loss from unauthorized use or disposition, and that the
financial records are reliable for preparing financial statements and maintaining accountability for assets. These
systems are augmented by written policies, an organizational structure providing division of responsibilities,
careful selection and training of qualified personnel, and a program of internal audits.
The Company engaged Deloitte & Touche LLP, independent auditors, to audit and render an opinion on the
consolidated financial statements and management’s report on its assessment and the effectiveness of internal
control over financial reporting in accordance with the standards of the Public Company Accounting Oversight
Board (United States).
The Board of Directors, through its Audit Committee, consisting solely of independent directors of the
Company, meets periodically with management, internal auditors and our independent auditors to ensure that
each is meeting its responsibilities and to discuss matters concerning internal controls and financial reporting.
Deloitte & Touche LLP and the internal auditors each have full and free access to the Audit Committee.
Steven A. Ballmer
Chief Executive Officer
Christopher P. Liddell
Senior Vice President, Finance and
Administration; Chief Financial Officer
Frank H. Brod
Corporate Vice President, Finance and
Administration; Chief Accounting Officer