2.1.428 Part 1 Section 17.15.2.1, allowPNG (Allow PNG as Graphic Format)

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a.   The standard states that when this element is false, the PNG file format shall not be allowed when this document is saved as a web page.

Word does save PNG files when this setting is off; however, the web page is structured such that the PNG files are not required for a web browser to read the file correctly.