Microsoft Corporation Annual Report 2005
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NOTES TO FINANCIAL STATEMENTS

NOTE 7    PROPERTY AND EQUIPMENT

(In millions)
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June 30 2004) spacer 2005)
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Land $(0,274)   $(0,313)
Buildings and improvements 1,981)   2,014)
Leasehold improvements 805)   851)
Computer equipment and software 2,637)   2,318)
Furniture and equipment 792)   879)
    Property and equipment, at cost 6,489)   6,375)
Accumulated depreciation (4,163)   (4,029)
        Property and equipment, net $(2,326)   $(2,346)

Property and equipment are stated at cost. Depreciation is computed principally on the straight-line method over the estimated useful lives of the assets. The useful lives for buildings range from five to fifteen years, leasehold improvements range from two years to ten years – representing the applicable lease terms plus reasonably assured extensions, computer equipment and software range from two to three years, and furniture and equipment range from one to five years. Land is not depreciated.

During fiscal years 2003, 2004, and 2005, depreciation expense was $929 million, $647 million, and $723 million, the majority of which related to computer equipment.

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