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Technology Stocks : How high will Microsoft fly?
MSFT 478.47-1.1%3:59 PM EST
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To: Michael L. Voorhees who wrote (50879)10/9/2000 4:53:27 PM
From: bmj3  Read Replies (1) of 74651
 
Here’s a little tidbit from MSFT’s recently issued June 30, 2000 annual report:

SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 137, Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of FASB Statement No. 133, and SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, is effective for the Company as of July 1, 2000. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities measured at fair value. The accounting for changes in the fair value of a derivative depends on the use of the derivative. Adoption of these new accounting standards will result in cumulative after-tax reductions in net income of approximately $350 million and other comprehensive income of approximately $50 million in the first quarter of fiscal 2001. The adoption will also impact assets and liabilities recorded on the balance sheet.

Here’s the similar disclosure from the June 30, 1999 financial statements:

During June 1999, the Financial Accounting Standards Board (FASB) issued SFAS 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement 133. The Statement defers the effective date of SFAS 133 to fiscal 2001. Management is evaluating SFAS 133 and does not believe that adoption of the Statement will have a material impact on its financial statements.

If they really lost $350 million in hedging activities that will be reported in the 1st Q of fiscal 2001, I don’t know how they’re going to meet their earnings estimate.
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