Microsoft is a well known company which deals in information technology products and services like product support, consulting services, MSN internet along with the certification of system integrators and information technology professionals. The case provides that Microsoft changed the way it reported in revenue and expenses as well as the associated costs of operating in the financial statement, specifically the balance sheet.
The reclassification saw that the revenue received and earned by the company was reclassified as per the primary activities of the Microsoft business. The costs as that were associated with the specific primary activities were allocated as direct costs to them under costs of revenue. Similarly in order to make way for consistency the company also reclassified some of its past financial statements specific to the balance sheet to make way for comparison and analysis and ease with consistency. This classification of the balance sheet simply resulted in the rearrange of the balance sheet items in a different manner with no effect on the earning per share of the company.
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