Microsoft 2007 Annual Report Download - page 53

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PAGE 52
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 OTHER COMPREHENSIVE INCOME
The activity in other comprehensive income and related tax effects were as follows:
(In millions)
Y
ear Ended June 30 2007 2006 2005
Net unrealized gains/(losses) on derivative instruments:
Unrealized gains, net of tax effect of $66 in 2007, $107 in
2006, and $0 in 2005 $ 123
$ 199 $ –
Reclassification adjustment for gains included in net income,
net of tax effect of $(59) in 2007, $(66) in 2006, and $(31)
in 2005 (109) (123) (58)
Net unrealized gains/(losses) on derivative instruments 14
76 (58)
Net unrealized gains/(losses) on investments:
Unrealized gains/(losses), net of tax effect of $393 in 2007,
$(105) in 2006, and $469 in 2005 730
(195) 870
Reclassification adjustment for gains included in net income,
net of tax effect of $(217) in 2007, $(47) in 2006, and
$(269) in 2005 (404) (87) (499)
Net unrealized gains/(losses) on investments 326
(282) 371
Translation adjustments and other 85
9 (6)
Other comprehensive income/(loss) $ 425
$(197) $ 307
Certain activity within the unrealized gains/(losses) and reclassification adjustment line items in 2006 and 2005
has been revised to correct the prior period presentation. These revisions did not affect other comprehensive
income/(loss) nor any of the subtotals in the table above.
The components of accumulated other comprehensive income were as follows:
(In millions)
Y
ear Ended June 30 2007 2006 2005
Net unrealized gains on derivative instruments $ 117 $ 103 $ 27
Net unrealized gains on investments 1,388 1,062 1,344
Translation adjustments and other 149 64 55
Accumulated other comprehensive income $1,654 $1,229 $1,426
NOTE 14 EMPLOYEE STOCK AND SAVINGS PLANS
Effective July 1, 2005, we adopted SFAS No. 123(R), Share-Based Payment, using the modified prospective
application transition method. Because the fair value recognition provisions of SFAS No. 123, Stock-Based
Compensation, and SFAS No. 123(R) were materially consistent under our equity plans, the adoption of SFAS
No. 123(R) did not have a significant impact on our financial position or our results of operations. Prior to our
adoption of SFAS No. 123(R), benefits of tax deductions in excess of recognized compensation costs were
reported as operating cash flows. SFAS No. 123(R) requires excess tax benefits be reported as a financing cash
inflow rather than as a reduction of taxes paid.
The stock-based compensation and related income tax benefits were as follows:
(In millions) 2007 2006 2005
Total stock-based compensation $1,550 $1,715 $2,448
Income tax benefits related to stock-based compensation $ 542 $ 600 $ 857