Microsoft 2008 Annual Report Download - page 56

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PAGE 55
Undelivered elements – Represents free post-delivery telephone support and the right to receive unspecified
upgrades/enhancements of Microsoft Internet Explorer on a when-and-if-available basis. This revenue deferral is
applicable for Windows XP and prior versions shipped as retail packaged products, products licensed to OEMs,
and perpetual licenses for current products under our Open and Select volume licensing programs. The amount
recorded as unearned is based on the sales price of those elements when sold separately and is recognized
ratably on a straight-line basis over the related product’s life cycle. The percentage of revenue recorded as
unearned due to undelivered elements ranges from approximately 15% to 25% of the sales price for Windows XP
Home and approximately 5% to 15% of the sales price for Windows XP Professional, depending on the terms and
conditions of the license and prices of the elements. Product life cycles are currently estimated at three and one-
half years for Windows operating systems.
Other – Represents payments for post-delivery support and consulting services to be performed in the future,
online advertising for which the advertisement has yet to be displayed, Microsoft Dynamics business solutions
products, Xbox Live subscriptions, Mediaroom, and other offerings for which we have been paid upfront and earn
the revenue when we provide the service or software, or otherwise meet the revenue recognition criteria.
The components of unearned revenue were as follows:
(In millions)
June 30, 2008 2007
Volume licensing programs $
1
2,232 $9,334
Undelivered elements 1,396 1,839
Other 1,669 1,473
Unearned revenue $
1
5,297 $
1
2,646
Unearned revenue by segment was as follows:
(In millions)
June 30, 2008 2007
Client $ 2,738 $2,875
Server and Tools 5,007 3,652
Microsoft Business Division 7,101 5,771
Other segments 451 348
Unearned revenue $
1
5,297 $
1
2,646
NOTE 13 OTHER LONG-TERM LIABILITIES
(In millions)
June 30, 2008 2007
Tax contingencies and other tax liabilities $ 3,812 $5,071
Legal contingencies 530 778
Product warranty 278 487
Other 101 117
Other long-term liabilities $ 4,721
$
6,453