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NOTES TO FINANCIAL STATEMENTS
NOTE 3 UNEARNED REVENUE
A portion of Microsoft’s revenue under volume licensing programs is earned ratably over the period of the license agreement. Also, revenue attributable to undelivered elements, including technical support and Internet browser technologies, is based on the average sales price of those elements when sold separately, and is recognized ratably on a straight-line basis over the product’s life cycle. The percentage of revenue recognized ratably for undelivered elements ranges from approximately 20% to 25% for Windows XP Home, approximately 10% to 15% for Windows XP Professional, and approximately 10% to 15% for desktop applications, depending on the terms and conditions of the license and prices of the elements. Product life cycles are currently estimated at three years for Windows operating systems and 18 months for desktop applications.
The components of unearned revenue were as follows:
| In millions |
|
| |
|
|
|
|
|
| June 30 |
|
2001 |
|
|
2002 |
| |
|
|
|
|
|
| |
|
|
|
|
|
| Volume licensing programs |
$ |
1,922 |
|
$ |
4,158 |
| Undelivered elements |
|
2,818 |
|
|
2,830 |
| Other |
|
874 |
|
|
755 |
|
|
|
| |
|
Unearned revenue
|
$ |
5,614 |
|
$ |
7,743 |
| |
|
|
|
| |
|
|
|
|
|
| |
Unearned revenue by product was as follows: |
|
|
|
|
|
| |
|
|
|
|
|
| In millions |
|
|
|
|
|
|
| |
|
|
|
|
|
| June 30 |
|
2001 |
|
|
2002 |
| |
|
|
|
|
|
| |
|
|
|
|
|
| Desktop Applications |
$ |
2,189 |
|
$ |
3,489 |
| Desktop Platforms |
|
2,586 |
|
|
3,198 |
| Enterprise Software and Services |
|
391 |
|
|
791 |
|
|
|
| |
Desktop and Enterprise Software and Services |
|
5,166 |
|
|
7,478 |
| |
Consumer Software, Services, and Devices, and Other |
|
448 |
|
|
265 |
|
|
|
| |
|
Unearned revenue |
$ |
5,614 |
|
$ |
7,743 |
| |
|
|
|
Of the $7.74 billion of unearned revenue at June 30, 2002, $2.28 billion is expected to be recognized in the first quarter of fiscal 2003, $1.64 billion in the second quarter of fiscal 2003, $1.18 billion in the third quarter of fiscal 2003, $817 million in the fourth quarter of fiscal 2003, and $1.82 billion thereafter.
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