Autodesk 2014 Annual Report Download - page 149

2013 Annual Report
2014 Form 10-K 75
The sales or settlement of “available-for-sale securities” in fiscal 2014 and fiscal 2013 resulted in a loss of $0.2 million
and a gain of $5.0 million, respectively. The sales or redemptions of “available-for-sale securities” in fiscal 2012 resulted in no
gains or losses. The losses and gains were recorded in "Interest and other (expense) income, net" on the Company's Condensed
Consolidated Statement of Operations.
Proceeds from the sale and maturity of marketable securities for fiscal 2014 and fiscal 2013 were $1,279.1 million and
$1,097.7 million, respectively.
Derivative Financial Instruments
Under its risk management strategy, Autodesk uses derivative instruments to manage its short-term exposures to
fluctuations in foreign currency exchange rates which exist as part of ongoing business operations. Autodesk's general practice
is to hedge a portion of transaction exposures denominated in euros, Japanese yen, Swiss francs, British pounds, Canadian
dollars and Australian dollars. These instruments have maturities between one to twelve months in the future. Autodesk does
not enter into derivative instrument transactions for trading or speculative purposes.
The bank counterparties in all contracts expose Autodesk to credit-related losses in the event of their nonperformance.
However, to mitigate that risk, Autodesk only contracts with counterparties who meet the Company's minimum requirements
under its counterparty risk assessment process. Autodesk monitors ratings, credit spreads and potential downgrades on at least a
quarterly basis. Based on Autodesk's on-going assessment of counterparty risk, the Company will adjust its exposure to various
counterparties. Autodesk generally enters into master netting arrangements, which reduce credit risk by permitting net
settlement of transactions with the same counterparty. However, Autodesk does not have any master netting arrangements in
place with collateral features.
Foreign currency contracts designated as cash flow hedges
Autodesk uses foreign currency contracts to reduce the exchange rate impact on a portion of the net revenue or operating
expense of certain anticipated transactions. These contracts are designated and documented as cash flow hedges. The
effectiveness of the cash flow hedge contracts is assessed quarterly using regression analysis as well as other timing and
probability criteria. To receive cash flow hedge accounting treatment, all hedging relationships are formally documented at the
inception of the hedge and the hedges are expected to be highly effective in offsetting changes to future cash flows on hedged
transactions. The gross gains and losses on these hedges are included in “Accumulated other comprehensive (loss)” and are
reclassified into earnings at the time the forecasted revenue or expense is recognized. In the event the underlying forecasted
transaction does not occur, or it becomes probable that it will not occur, Autodesk reclassifies the gain or loss on the related
cash flow hedge from “Accumulated other comprehensive (loss)” to “Interest and other (expense) income, net” in the
Company's Consolidated Financial Statements at that time.
The net notional amount of these contracts are presented net settled and were $351.7 million at January 31, 2014 and
$359.8 million at January 31, 2013. Outstanding contracts are recognized as either assets or liabilities on the balance sheet at
fair value. The majority of the net gain of $3.5 million remaining in “Accumulated other comprehensive (loss)” as of
January 31, 2014 is expected to be recognized into earnings within the next twelve months.
Derivatives not designated as hedging instruments
Autodesk uses foreign currency contracts which are not designated as hedging instruments to reduce the exchange rate
risk associated primarily with foreign currency denominated receivables and payables. These forward contracts are marked-to-
market at the end of each fiscal quarter with gains and losses recognized as “Interest and other (expense) income, net.” These
derivative instruments do not subject the Company to material balance sheet risk due to exchange rate movements because
gains and losses on these derivative instruments are intended to offset the gains or losses resulting from the settlement of the
underlying foreign currency denominated receivables and payables. The net notional amounts of these foreign currency
contracts are presented net settled and were $205.5 million at January 31, 2014 and $78.4 million at January 31, 2013.
From time to time and consistent with its risk management policy, Autodesk also uses derivative instruments to hedge its
economic exposure related to committed, in-process acquisitions priced in foreign currency. Such derivatives do not qualify for
hedge accounting and are marked-to-market through earnings, with any gain or loss reflected immediately in “Interest and other
(expense) income, net,” in each period.