Autodesk 2008 Annual Report Download - page 108

In assessing the recoverability of these long-lived assets, we first determine their fair values, which are
based on assumptions regarding the estimated future cash flows that could reasonably be generated by these
assets. When assessing long-lived assets, we use undiscounted cash flow models which include assumptions
regarding projected cash flows. Because expected lives are relatively short, discounting the projected cash flows
would not lead to a significantly different result. Variances in these assumptions could have a significant impact
on our conclusion as to whether an asset is impaired or the amount of the impairment charge. Impairment
charges, if any, result in situations where the fair values of these assets are less than their carrying values.
In addition to our recoverability assessments, we routinely review the remaining estimated useful lives of
our long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and
amortization expense in the quarter when such determinations are made, as well as in subsequent quarters.
We will continue to evaluate the values of our long-lived assets in accordance with applicable accounting
rules. As changes in business conditions and our assumptions occur, we may be required to record impairment
charges.
Goodwill. We test goodwill for impairment annually in the fourth quarter or sooner should events or
changes in circumstances indicate potential impairment. When assessing goodwill for impairment, we use
discounted cash flow models which include assumptions regarding projected cash flows. Variances in these
assumptions could have a significant impact on our conclusion as to whether goodwill assets are impaired or the
amount of the impairment charge. Impairment charges, if any, result from instances where the fair values of net
assets associated with goodwill are less than their carrying values. As changes in business conditions and our
assumptions occur, we may be required to record impairment charges.
Income Taxes. We currently have $149.4 million of net deferred tax assets, mostly arising from net
operating losses including stock option deductions taken in fiscal years prior to fiscal 2007, tax credits,
non-deductible accruals and timing differences for purchased technologies and capitalized software, offset by the
establishment of U.S. deferred tax liabilities on unremitted earnings from certain foreign subsidiaries. We
perform a quarterly assessment of the recoverability of these net deferred tax assets, which is principally
dependent upon our achievement of projected future taxable income of approximately $408 million across a
specific mix of geographies. Our judgments regarding future profitability may change due to future market
conditions and other factors. These changes, if any, may require possible material adjustments to these net
deferred tax assets, resulting in a reduction in net income in the period when such determinations are made.
Autodesk is a U.S. based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions.
Our effective tax rate is based on expected geographic mix of earnings, statutory rates, intercompany transfer
pricing, and enacted tax rules. Significant judgment is required in determining our effective tax rate and in
evaluating our tax positions on a worldwide basis. We believe our tax positions, including intercompany transfer
pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business. It is
possible that these positions may be challenged which may have a significant impact on our effective tax rate.
We adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation
of FASB Statement No. 109” on February 1, 2007. The amount of unrecognized tax benefits may increase or
decrease in the future for various reasons such as current year tax positions, expiration of statutes of limitations,
litigation, legislative activity, or other changes in facts regarding realizability.
Share-Based Compensation. In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 123—revised 2004, “Share-Based Payment” (“SFAS 123R”), which replaces Statement of
Financial Accounting Standards No. 123 (“SFAS 123”) and supersedes APB 25. SFAS 123R requires the
measurement of all share-based payments to employees, including grants of employee stock options, using a fair-
value based method and the recording of such expense in our Consolidated Statements of Income.
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