On Thursday Microsoft Corp stated that a review of its US tax obligations in past years by a government would negatively impact its financial statements in case it is not resolved in its favor.

Among other things the Internal Revenue Service was looking at Microsoft's use of transfer pricing, or methods of booking prices and sales between subsidiaries which allows big companies to avail of opportunities to report earnings in lower-tax jurisdictions.

To avoid being taxed a 35 percent levy on profits in the United States companies legally report their profits overseas to get lower tax rates.

But in the wake of high unemployment and drastic budget deficits America is called for simplifying a tax code with a lower corporate tax rate and fewer loopholes. Major companies pressed Obama’s administration to let profits parked offshore be brought home at very low tax rates, to boost investment and jobs.

In Thursday's filing, Microsoft said the IRS had issued a Revenue Agent's Report after an examination of the 2004-2006 tax years, but Microsoft was appealing several adjustments cited in the report.

"We do not agree with the adjustments in the RAR, and we have filed a protest to initiate the administrative appeals process," Microsoft said in an exchange filing. "The proposed adjustments are primarily related to transfer pricing and could have a significant impact on our financial statements if not resolved favorably.

"However, we believe our existing reserves are adequate."