Microsoft 2007 Annual Report Download - page 51

PAGE 50
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Although we believe we have appropriate support for the positions taken on our tax returns, we have recorded
a liability for our best estimate of the probable loss on certain of these positions, the non-current portion of which
is included in other long-term liabilities. We believe that our accruals for tax liabilities are adequate for all open
years, based on our assessment of many factors including past experience and interpretations of tax law applied
to the facts of each matter, which matters result primarily from inter-company transfer pricing, restructuring of
foreign operations, tax benefits from the Foreign Sales Corporation and Extra Territorial Income tax rules, the
amount of research and experimentation tax credits claimed, state income taxes, and certain other matters.
Although we believe our recorded assets and liabilities are reasonable, tax regulations are subject to
interpretation and tax litigation is inherently uncertain; therefore our assessments can involve both a series of
complex judgments about future events and rely heavily on estimates and assumptions. Although we believe that
the estimates and assumptions supporting our assessments are reasonable, the final determination of tax audit
settlements and any related litigation could be materially different than that which is reflected in historical income
tax provisions and recorded assets and liabilities. If we were to settle an audit or a matter under litigation, it could
have a material effect on our income tax provision, net income, or cash flows in the period or periods for which
that determination is made. Due to the complexity involved we are not able to estimate the range of reasonably
possible losses in excess of amounts recorded.
The Internal Revenue Service (“IRS”) has completed and closed its audits of our consolidated federal income
tax returns through 1999. The IRS is currently conducting audits of our consolidated federal income tax return for
tax years 2000 through 2006.
NOTE 11 OTHER LONG-TERM LIABILITIES
(In millions)
June 30 2007 2006
Tax contingencies $5,071 $4,194
Legal contingencies 778 1,022
Product warranty 487
–
Other 117 71
Other long-term liabilities $6,453
$5,287
NOTE 12 STOCKHOLDERS’ EQUITY
Shares of common stock outstanding were as follows:
(In millions)
Y
ear Ended June 30 2007 2006 2005
Balance, beginning of year 10,062
10,710 10,862
Issued 289 106 160
Repurchased (971) (754) (312)
Balance, end of year 9,380 10,062 10,710
On July 20, 2006, we announced the completion of the repurchase program initially approved by our Board of
Directors on July 20, 2004 to buy back up to $30.00 billion in Microsoft common stock.
On July 20, 2006, we also announced that our Board of Directors authorized two new share repurchase
programs: a $20.00 billion tender offer, which was completed on August 17, 2006; and authorization for up to an
additional $20.00 billion ongoing share repurchase program with an expiration of June 30, 2011. Under the tender
offer, we repurchased approximately 155 million shares of common stock, or 1.5% of our common shares
outstanding, for approximately $3.84 billion at a price per share of $24.75. On August 18, 2006, we announced
that the authorization for the $20.00 billion ongoing share repurchase program had been increased by
approximately $16.16 billion. As a result, we are authorized to repurchase additional shares in an amount up to