Question

List a few key events and explain why they occurred and financial effects that impacted Microsoft's shareholder's equity in 2016.

STOCKHOLDERS’ EQUITY STATEMENTS

(In millions)
Year Ended June 30,	2016		2015		2014
Common stock and paid-in capital
Balance, beginning of period	$68,465		$68,366		$67,306
Common stock issued	688		634		607
Common stock repurchased	(3,689)		(3,700)		(2,328)
Stock-based compensation expense	2,668		2,574		2,446
Stock-based compensation income tax benefits	0		588		272
Other, net	66		3		63
Balance, end of period	68,178		68,465		68,366
Retained earnings
Balance, beginning of period	9,096		17,710		9,895
Net income	16,798		12,193		22,074
Common stock cash dividends	(11,329)		(10,063)		(9,271)
Common stock repurchased	(12,283)		(10,744)		(4,988)
Balance, end of period	2,282		9,096		17,710
Accumulated other comprehensive income
Balance, beginning of period	2,522		3,708		1,743
Other comprehensive income (loss)	(985)		(1,186)		1,965
Balance, end of period	1,537		2,522		3,708
Total stockholders’ equity	$71,997		$80,083		$89,784

Answer 1

Common Stock repurchased - This is repurchase of stock from the market and people by the company itself. The same is done to preserve the stock price. Also it increases the EPS of the stock.

It reduces the equity balance. The face value is reduced from equity section and the premium amount is reduced from retained earnings.

Stock-based compensation expense - This is way of providing incentives to the employees. This is also known as ESOP. This is generally done to increase the confidence of employees.

It increases the equity balance.

Common stock cash dividends - It is the dividend which is paid to the shareholders.

If it is paid out of profit, it reduces the retained earnings of the company.

Other comprehensive income (loss) - This income/loss can be due to:-

• Unrealized holding gains or losses on investments that are classified as available for sale
• Foreign currency translation gains or losses
• Pension plan gains or losses
• Pension prior service costs or credits

Income in other comprehensive income increases the equity balance and loss reduces the equity balance.