Autodesk 2014 Annual Report Download - page 111

2013 Annual Report
2014 Form 10-K 37
of critical estimates used in valuing certain of the intangible assets we have acquired or may acquire in the future include but
are not limited to:
 future expected cash flows from sales, maintenance agreements and acquired developed technologies;
 the acquired company’s trade name and customer relationships as well as assumptions about the period of
time the acquired trade name and customer relationships will continue to be used in the combined company’s
product portfolio;
 expected costs to develop the in-process research and development into commercially viable products and
estimated cash flows from the projects when completed; and
 discount rates used to determine the present value of estimated future cash flows.
These estimates are inherently uncertain and unpredictable, and if different estimates were used the purchase price for the
acquisition could be allocated to the acquired assets and liabilities differently from the allocation that we have made. In
addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates, and if
such events occur we may be required to record a charge against the value ascribed to an acquired asset or an increase in the
amounts recorded for assumed liabilities.
Goodwill. When we acquire a business, a portion of the purchase consideration is typically allocated to acquired
technology and other identifiable intangible assets, such as customer relationships and developed technology. The excess of the
purchase consideration over the net of the acquisition-date fair value of identifiable assets acquired and liabilities assumed is
recorded as goodwill. The amounts allocated to acquired technology and other intangible assets represent our estimates of their
fair values at the acquisition date. We amortize the acquired technology and other intangible assets with finite lives over their
estimated useful lives. The estimation of acquisition-date fair values of intangible assets and their useful lives requires us to
make assumptions and judgments, including but not limited to an evaluation of macroeconomic conditions as they relate to our
business, industry and market trends, projections of future cash flows and appropriate discount rates.
We test goodwill for impairment annually in our fourth fiscal quarter or sooner should events or changes in
circumstances indicate potential impairment as required under Accounting Standard Update No. 2011-08, "Testing Goodwill for
Impairment” (“ASU 2011-08”). ASU 2011-08 provides for an optional assessment of qualitative factors of impairment
(“optional assessment”) prior to necessitating a two-step quantitative impairment test. Should the optional assessment be
utilized for any given fiscal year, qualitative factors to consider include cost factors; financial performance; legal, regulatory,
contractual, political, business, or other factors; entity specific factors; industry and market considerations, macroeconomic
conditions, and other relevant events and factors affecting the reporting unit. If, after assessing the totality of events or
circumstances, it is more likely than not that the fair value of the reporting unit is greater than its carrying value, then
performing the two-step impairment test is unnecessary.
Under the two-step quantitative impairment test, 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 is impaired, or the amount of any 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.
For our annual impairment assessment in fiscal 2014, we did not utilize the optional assessment. Rather, we used the
quantitative two-step impairment test for each of our Platform Solutions and Emerging Business (“PSEB”), Manufacturing
("MFG"), Architecture, Engineering and Construction ("AEC"), and Media and Entertainment (“M&E”) reporting units and
used a discounted cash flow model which included assumptions regarding projected cash flows. Based on this testing, we
determined that the fair value was substantially in excess of the carrying value for each of the four reporting units and that there
was no impairment of goodwill during the year ended January 31, 2014.
Realizability of Long-Lived Assets. We assess the realizability of our long-lived assets and related intangible assets,
other than goodwill, annually during the fourth fiscal quarter, or sooner should events or changes in circumstances indicate the
carrying values of such assets may not be recoverable. We consider the following factors important in determining when to
perform an impairment review: significant under-performance of a business or product line relative to budget; shifts in business
strategies which affect the continued uses of the assets; significant negative industry or economic trends; and the results of past
impairment reviews. When such events or changes in circumstances occur, we assess recoverability of these assets.