Microsoft 2015 Annual Report Download - page 80

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79
Revenue and cost of revenue are generally directly attributed to our segments. Certain revenue contracts are
allocated among the segments based on the relative value of the underlying products and services, which can
include allocation based on actual prices charged, prices when sold separately, or estimated costs plus a profit
margin. Cost of revenue is directly charged to our hardware segments. For the remaining segments, cost of revenue
is directly charged in most cases and allocated in certain cases, generally using a relative revenue methodology.
We do not allocate operating expenses to our segments. Rather, we allocate them to our two segment groups,
Devices and Consumer and Commercial. Due to the integrated structure of our business, allocations of expenses are
made in certain cases to incent cross-collaboration among our segment groups so that a segment group is not solely
burdened by the cost of a mutually beneficial activity as we seek to deliver seamless experiences across devices,
whether on-premises or in the cloud.
Operating expenses are attributed to our segment groups as follows:
• Sales and marketing expenses are primarily recorded directly to each segment group based on identified
customer segment.
• Research and development expenses are primarily shared across the segment groups based on relative
gross margin but are mapped directly in certain cases where the value of the expense only accrues to that
segment group.
• General and administrative expenses are primarily allocated based on relative gross margin.
Certain corporate-level activity is not allocated to our segment groups, including costs of: legal, including expenses,
settlements, and fines; information technology; human resources; finance; excise taxes; and impairment, integration,
and restructuring expenses.
Segment revenue and gross margin were as follows during the periods presented:
(In millions)
Y
ear Ended June 30, 2015
2014 2013
Revenue
Devices and Consumer Licensing $ 14,969 $ 19,528 $ 19,427
Hardware:
Computing and Gaming Hardware 10,183 9,093 6,149
Phone Hardware 7,524 1,982 0
Total Devices and Consumer Hardware 17,707 11,075 6,149
Other 8,825 7,014 6,431
Total Devices and Consumer 41,501 37,617 32,007
Commercial Licensing 41,039 42,085 39,778
Other 10,836 7,546 5,661
Total Commercial 51,875 49,631 45,439
Corporate and Other 204 (415) 403
Total revenue $93,580 $ 86,833 $77,849