Question
Footnote 9 of Microsofts 2017 annual report discloses how much revenue Microsoft consolidated from LinkedIn in the year of the acquisition, fiscal year 2017. It
Footnote 9 of Microsofts 2017 annual report discloses how much revenue Microsoft consolidated from LinkedIn in the year of the acquisition, fiscal year 2017. It also discloses pro-forma consolidated revenues for 2017 and 2016 had the acquisition closed seventeen months earlier, on July 1, 2015.
NOTE 9 BUSINESS COMBINATIONS
On December 8, 2016, we completed our acquisition of all issued and outstanding shares of LinkedIn Corporation, the worlds largest professional network on the Internet, for a total purchase price of $27.0 billion. The financial results of LinkedIn have been included in our consolidated financial statements since the date of the acquisition. Our consolidated income statement includes the following revenue and operating loss attributable to LinkedIn since the date of acquisition:
Following are the supplemental consolidated financial results of Microsoft Corporation on an unaudited pro forma basis, as if the acquisition had been consummated on July 1, 2015:
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By analyzing the revenue disclosures in the footnote in conjunction with the revenue reported in the income statement, we can gain quick insights into why Microsoft purchased LinkedIn. The next two Work Schedules will walk you through some basic analysis of the information disclosed in the footnote and in the financial statements themselves. The first Work Schedule asks you to gather information from the 2017 five-year summary and Footnote 9 to analyze what percentage of Microsofts 2017 revenue was generated by the newly acquired LinkedIn.
Please see the Excel file with the formula already entered to calculate percentage changes.
Work Schedule 1. Microsoft 2017 revenue with and without LinkedIn | |
Microsoft 2017 revenue (in millions), including seven months during which it owned LinkedIn (source: income statement or 5-year summary) |
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LinkedIn revenue included by Microsoft in 2017 (in millions; source: Footnote 9) |
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Percentage of 2017 Microsoft revenue consisting of LinkedIn revenue (Answer as a percentage X.X%) |
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Microsoft 2017 revenue (in millions), excluding LinkedIn |
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Work Schedule 2. Microsoft growth rate (reported, pro-forma, organic) and LinkedIn growth rate | ||||
| 2017 (millions) | 2016 (millions) | Growth (X.X%) | |
a | Microsoft reported revenues, which includes seven months of LinkedIn for 2017 source: income statement or 5-year summary |
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b | Microsoft pro-forma revenues, including twelve months of LinkedIn source: Footnote 9 |
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c | Microsoft revenues excluding LinkedIn 2017 source: last line of Schedule 1 above 2016 source: income statement or 5-year summary |
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d | Twelve-month LinkedIn revenue calculation: b minus c |
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4a Insert your answer from Work Schedule 1 here.
LinkedIn revenue included by Microsoft in 2017 (in millions; source: Footnote 9) |
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4b. Insert your answer from Work Schedule 2 here. | 2017 |
Twelve-month LinkedIn revenue calculation: b minus c |
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4c. Explain why your answers in 4a and 4b are different.
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