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Microsoft 10-K Elves Report

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Item 7A Quant. & Qual. Disclosures Re: Market Risk

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Risks

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Microsoft is exposed to economic risk from foreign exchange rates, interest rates, credit risk, and equity prices.
Microsoft uses derivatives instruments to manage these risks, however, they may still impact Microsoft's consolidated financial statements.

Foreign Currencies

Microsoft monitors their forecasted transactions, assets, and liabilities that are exposed to foreign currency risk daily to maximize the economic effectiveness of their foreign currency positions, including hedges.
Their principal currency exposures include the
Euro,
Japanese yen,
British pound,
Canadian dollar, and
Australian dollar.

Interest Rate

Securities held in Microsoft's fixed-income portfolio are subject to different interest rate risks based on their maturities.
Microsoft manages the average maturity of the fixed-income portfolio to achieve economic returns that correlate to certain global fixed-income indices.

Credit

Microsoft's fixed-income portfolio is diversified and consists primarily of investment-grade securities.
They manage credit exposures relative to broad-based indices and to facilitate portfolio diversification.

Equity

Securities held in Microsoft's equity investments portfolio are subject to price risk.

Sensitivity Analysis

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The table below shows how much money could be lost in the future due to changes in market rates or prices, including any related derivatives.
Risk Categories (In millions)
Hypothetical Change
6/30/22
Impact
1
Foreign currency – Revenue
10% decrease in foreign exchange rates
(6,822)
Earnings
2
Foreign currency – Investments
10% decrease in foreign exchange rates
(94)
Fair Value
3
Interest rate
100 basis point increase in U.S. treasury interest rates
(2,536)
Fair Value
4
Credit
100 basis point increase in credit spreads
(350)
Fair Value
5
Equity
10% decrease in equity market prices
(637)
Earnings
There are no rows in this table
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