Autodesk 2001 Annual Report Download - page 37

34 FY 01 Autodesk, Inc.
Computer Equipment, Furniture and Leasehold
Improvements
Computer equipment and furniture are depreciated
using the straight-line method over the estimated useful
lives of the assets, which range from two to five years.
Leasehold improvements are amortized on a straight-line
basis over the shorter of the estimated useful life or the
lease term. Depreciation expense was $26.2 million
in fiscal 2001, $30.2 million in fiscal 2000 and $33.0 mil-
lion in fiscal 1999.
Purchased Technologies and Capitalized
Software
Costs incurred in the initial design phase of software
development are expensed as incurred. Once the point of
technological feasibility is reached, production costs (pro-
gramming and testing) are capitalized. Certain acquired
software-technology rights are also capitalized. Capital-
ized software costs are amortized ratably, as revenues are
recognized, but not less than on a straight-line basis over
18-month to five-year periods. Amortization expense,
which is included as a component of cost of revenues, was
$16.1 million in fiscal 2001, $18.9 million in fiscal 2000 and
$19.1 million in 1999. The actual lives of Autodesk’s pur-
chased technologies or capitalized software may differ
from management’s estimates, and such differences could
cause carrying amounts of these assets to be reduced
materially.
Other Intangible Assets
Amortization of purchased intangibles and goodwill is
provided on a straight-line basis over the respective useful
lives of the assets, which range from three to seven years.
Accumulated amortization was $118.5 million as of
January 31, 2001 and $91.9 million at January 31, 2000.
As circumstances dictate, Autodesk assesses the recover-
ability of its other intangible assets by comparing the
undiscounted net cash flows associated with such assets
against their respective carrying values. Impairment, if any,
is based on the excess of the carrying value over the fair
value.
Web Site Development Costs
During the third quarter of fiscal 2001, Autodesk adopted
the provisions of the Emerging Issues Task Force (”EITF”)
consensus No. 00-2, ”Accounting for Web Site Develop-
ment Costs.” This consensus provides guidance on what
types of costs associated with Web site development
should be capitalized or expensed. Through January 31,
2001, Autodesk capitalized $1.7 million of Web site devel-
opment costs. Such capitalized amounts are being
amortized over a two-year period.
Investments in Privately Held Businesses
Autodesk has several minority investments in privately
held technology companies, many of which are in the
start-up or development stage. With the exception of
investments in Buzzsaw.com, Inc. and RedSpark, Inc., these
investments are accounted for using the cost method of
accounting. These investments are carried at cost and are
included in other assets in the accompanying consoli-
dated balance sheets. Autodesk monitors these
investments for impairment and makes appropriate
reductions in carrying values when declines in their fair
value are determined to be other-than-temporary.
Employee Stock Compensation
As permitted by Statement of Financial Accounting
Standards (”SFAS”) No. 123, ”Accounting for Stock-
Based Compensation” (”SFAS 123”), Autodesk
measures compensation expense for its stock-based
employee compensation plans using the intrinsic
method prescribed by Accounting Principles Board
Opinion No. 25, ”Accounting for Stock Issued to
Employees” (”APB 25”). In accordance with SFAS 123,
Autodesk has provided in Note 10 the pro forma dis-
closures of the effect on net income and earnings per
share if SFAS 123 had been applied in measuring com-
pensation expense for all periods presented.
Revenue Recognition
Autodesk recognizes revenue when persuasive evidence
of an arrangement exists,delivery has occurred or services
have been rendered,the price is fixed or determinable,and
collectibility is probable. Autodesk’s revenue recognition
policies are in compliance with the provisions of the
American Institute of Certified Public Accountants’
Statement of Position 97-2, ”Software Revenue Recog-
nition” (”SOP 97-2”), as amended by Statement of
Position 98-9.
Net revenues primarily consist of product sales, which
include software licenses and the related hardware and
peripherals. Product sales are recognized at the time of
shipment. In addition to product sales, Autodesk recog-
nizes subscription revenues ratably over the contract
period, customer consulting and training revenues as the
services are performed, and revenues from post contract
customer support and other related services ratably as the
obligations are fulfilled, or when the related services are
performed.
With the exception of certain distributors, agreements with
Autodesk’s value-added resellers (”VARs”) do not contain
specific product-return privileges. However, Autodesk per-
mits its VARs to return product in certain instances, generally