Microsoft 2013 Annual Report Download - page 53

(if any). If an entity determines that the fair value of a reporting unit is greater than its carrying amount, the two-step
goodwill impairment test is not required. We adopted this new guidance beginning July 1, 2012. Adoption of this new
guidance did not have a material impact on our financial statements.
In June 2011, the FASB issued guidance on presentation of comprehensive income. The new guidance eliminated the
option to report OCI and its components in the statement of changes in stockholders’ equity. Instead, an entity is required
to present either a continuous statement of net income and OCI or in two separate but consecutive statements. We
adopted this new guidance beginning July 1, 2012. Adoption of this new guidance resulted only in changes to
presentation of our financial statements.
Recent accounting guidance not yet adopted
In December 2011, the FASB issued guidance enhancing disclosure requirements about the nature of an entity’s right to
offset and related arrangements associated with its financial instruments and derivative instruments. The new guidance
requires the disclosure of the gross amounts subject to rights of set-off, amounts offset in accordance with the accounting
standards followed, and the related net exposure. In January 2013, the FASB clarified that the scope of this guidance
applies to derivatives, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase
agreements, and securities borrowing and securities lending transactions that are either offset or subject to an
enforceable master netting arrangement, or similar agreements. The new guidance will be effective for us beginning
July 1, 2013. Other than requiring additional disclosures, we do not anticipate material impacts on our financial statements
upon adoption.
In February 2013, the FASB issued guidance on disclosure requirements for items reclassified out of AOCI. This new
guidance requires entities to present (either on the face of the income statement or in the notes) the effects on the line
items of the income statement for amounts reclassified out of AOCI. The new guidance will be effective for us beginning
July 1, 2013. Other than requiring additional disclosures, we do not anticipate material impacts on our financial statements
upon adoption.
In March 2013, the FASB issued guidance on a parent’s accounting for the cumulative translation adjustment upon
derecognition of a subsidiary or group of assets within a foreign entity. This new guidance requires that the parent release
any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or
substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The new
guidance will be effective for us beginning July 1, 2014. We do not anticipate material impacts on our financial statements
upon adoption.
NOTE 2 — EARNINGS PER SHARE
Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock
outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common
stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.
Dilutive potential common shares include outstanding stock options, stock awards, and shared performance stock awards.
The components of basic and diluted EPS are as follows:
(In millions, except earnings per share)
Year Ended June 30,
2013
2012
2011
Net income available for common shareholders (A)
$ 21,863
$ 16,978
$ 23,150
Weighted average outstanding shares of common stock (B)
8,375
8,396
8,490
Dilutive effect of stock-based awards
95
110
103
Common stock and common stock equivalents (C)
8,470
8,506
8,593
Earnings Per Share
Basic (A/B)
$ 2.61
$ 2.02
$ 2.73
Diluted (A/C)
$ 2.58
$ 2.00 $ 2.69