MSFT · 10-Q · 2026Q1 · Full report

Legal Contingencies and Accruals

MICROSOFT CORP · 2026-04-29 · Importance 46 · Surprise 42 · In source text

Microsoft acknowledges that outcomes of legal proceedings and claims are uncertain and accrues losses when an unfavorable outcome is probable and the amount can be reasonably estimated. In assessing whether to accrue, the company evaluates the degree of probability and the ability to reasonably estimate loss amounts. Because judgments about probability and estimability drive accruals, changes in these assessments could materially impact the consolidated financial statements. This framework applies broadly to legal and other contingent liabilities faced by the company.

Key facts

• General and administrative expenses increased $194 million or 11% for the three months ended March 31, 2026 primarily driven by higher legal expenses. source
• An estimated loss from a loss contingency such as a legal proceeding or claim is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. source
• In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. source

Impact estimates