Revenue related to licensing for games published by third parties for use on the Xbox consoles is recognized when games are manufactured by the game publishers.Display advertising revenue is recognized as advertisements are displayed. Critical accounting policies for us include revenue recognition, impairment of investment securities, goodwill, research and development costs, contingencies, income taxes, and inventories.Revenue recognition for multiple-element arrangements requires judgment to determine if multiple elements exist, whether elements can be accounted for as separate units of accounting, and if so, the fair value for each of the elements.Judgment is also required to assess whether future releases of certain software represent new products or upgrades and enhancements to existing products.
Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. As a result, changes in foreign exchange rates may significantly affect revenue and expenses. Agreements are generally structured with a three-year term, and partners are billed monthly based upon consumption.The Microsoft Online Services Reseller Agreement is a program that enables partners to package Microsoft online services with the partnersâ services.The Independent Software Vendor Royalty program enables partners to use Microsoft software in their own software programs.Our customers include individual consumers, small- and medium-sized organizations, large global enterprises, public sector institutions, Internet service providers, application developers, and OEMs. Operating expenses increased $989 million or 12%, mainly due to higher research and development expenses and sales and marketing expenses.
The proceeds of these issuances were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, repurchases of capital stock, acquisitions, and repayment of existing debt. Expenses included a favorable foreign currency impact of approximately 4%.General and administrative expenses include payroll, employee benefits, stock-based compensation expense, severance expense, and other headcount-related expenses associated with finance, legal, facilities, certain human resources and other administrative personnel, certain taxes, and legal and other administrative fees.General and administrative expenses decreased $48 million or 1%, primarily due to a reduction in employee-related expenses, offset in part by increased investments in infrastructure supporting our business transformation. Our effective tax rate was lower than the U.S. federal statutory rate primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore, and Puerto Rico.The decrease in our effective tax rate for fiscal year 2016 compared to fiscal year 2015 was primarily due to changes in the mix of our income before income taxes between the U.S. and foreign countries including the impact of net revenue deferrals related to sales of Windows 10, tax benefits from the adoption of the new accounting guidance relating to stock-based compensation, and distributions from foreign affiliates. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. 0 Revenue included an unfavorable foreign currency impact of approximately 2%.Productivity and Business Processes operating income decreased $814 million or 6%, driven by lower gross margin, offset in part by a reduction in operating expenses.
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sony annual report 2016