Autodesk 2008 Annual Report Download - page 125

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency exchange risk
Our revenue, earnings and cash flows are subject to fluctuations due to changes in foreign currency
exchange rates. Our risk management strategy utilizes foreign currency forward and option contracts to manage
our foreign currency exposures that exist as part of our ongoing business operations, but such contracts do not
extend beyond the current quarter. Contracts are primarily denominated in euros, British pounds, Japanese yen,
Swiss francs, and Canadian dollars. We do not enter into any foreign exchange derivative instruments for trading
or speculative purposes.
Autodesk utilizes foreign currency option collar contracts to reduce the exchange rate impact on the net
revenue of certain anticipated transactions. A sensitivity analysis performed on our hedging portfolio as of
January 31, 2008 indicated that a hypothetical 10% appreciation of the U.S. dollar from its value at January 31,
2008 would increase the fair value of our forward exchange and option contracts by $3.9 million. A hypothetical
10% depreciation of the dollar from its value at January 31, 2008 would decrease the fair value of our forward
exchange and option contracts by $2.8 million. The results of the sensitivity analysis performed on our hedging
portfolio as of January 31, 2007 indicated that a hypothetical 10% appreciation of the U.S. dollar from its value
at January 31, 2007 would have increased the fair value of our forward exchange and option contracts by
$0.4 million and a hypothetical 10% depreciation of the dollar from its value at January 31, 2007 would have
increased the fair value of our forward exchange and option contracts by $0.9 million. We do not anticipate any
material adverse impact to our consolidated financial position, results of operations or cash flows as a result of
these foreign currency forward and option contracts.
Interest rate sensitivity
At January 31, 2008, we had an investment portfolio of fixed income securities and short term mutual fund
balances of $31.4 million. These securities were not subject to interest rate fluctuations. At January 31, 2007, we
had an investment portfolio of fixed income securities and short term mutual fund balances of $112.0 million.
These securities were also not subject to interest rate fluctuations. The short-term mutual fund balances included
$26.7 million at January 31, 2008 and $27.2 million at January 31, 2007 of amounts held in a rabbi trust under
deferred compensation arrangements. See Note 4, “Deferred Compensation,” in the Notes to Consolidated
Financial Statements for further discussion.
We do not use derivative financial instruments in our investment portfolio to manage interest rate risk. We
place our investments in instruments that meet high credit quality standards, as specified in our investment policy
guidelines, which limits the amount of credit exposure to any one issue, issuer or type of instrument.
49
2008 Annua
l Report