Autodesk 2000 Annual Report Download - page 37

36 FY 00 Autodesk, Inc.
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, produc-
tion costs (programming and testing) are capitalized.
Certain acquired software-technology rights are also
capitalized. Capitalized software costs are amortized
ratably, as revenues are recognized, but not less
than on a straight-line basis over two- to seven-year
periods. Amortization expense, which is included as
a component of cost of revenues, was $18.9 million,
$19.1 million and $14.4 million in fiscal 2000, 1999
and 1998, respectively. The actual lives of Autodesk’s
purchased technologies or capitalized software may
differ from management’s estimates, and such differ-
ences 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
ten years. Accumulated amortization was $91.9 mil-
lion,$60.9 million and $39.6 million in fiscal 2000,1999
and 1998, respectively.
As circumstances dictate, Autodesk assesses the
recoverability of its other intangible assets by com-
paring 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.
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 8 the pro forma disclosures of the
effect on net income and earnings per share if SFAS
123 had been applied in measuring compensation
expense for all periods presented.
Revenue Recognition
Autodesk’s revenue recognition policy is in compli-
ance with the provisions of the American Institute
of Certified Public Accountants’ Statement of Position
97-2, “Software Revenue Recognition” (“SOP 97-2”),
as amended by Statement of Position 98-4 (“SOP
98-4”).Revenue from software licenses and the related
hardware and peripherals is recognized at the time of
shipment, provided that no significant vendor obliga-
tions exist and collection of the resulting receivable
is deemed probable. Revenues related to customer
consulting and training are recognized as the services
are performed. Revenue from post contract customer
support and other related services is recognized rat-
ably as the obligations are fulfilled, or when the related
services are performed.
With the exception of certain European distributors,
agreements with Autodesk’s value-added resellers
(“VARs”) do not contain specific product-return privi-
leges. However, Autodesk permits its VARs to return
product in certain instances, generally during periods
of product transition and during update cycles.
Autodesk establishes allowances for product returns,
including allowances for stock balancing and product
rotation,based on estimated future returns of product
and after taking into consideration channel inventory
levels at its resellers, the timing of new product intro-
ductions and other factors. These allowances are
recorded as direct reductions of revenue and accounts
receivable. While Autodesk maintains strict measures
to monitor channel inventories and to provide appro-
priate allowances, actual product returns may differ
from Autodesk’s estimates,and such differences could
be material to the consolidated financial statements.
Advertising Expenses
Advertising costs are expensed the first time the adver-
tising takes place.Total advertising expenses incurred
were $18.3 million, $13.1 million and $14.4 million
during fiscal 2000, 1999 and 1998, respectively.
Recently Issued Accounting Standards
Autodesk has until fiscal year 2002 to adopt the provi-
sions of Statement of Financial Accounting Standards
No. 133, “Accounting for Derivative Instruments and
Hedging Activities” (“SFAS 133”), which was issued in
June 1998.This Statement requires Autodesk to recog-
nize all derivatives on the balance sheet at fair value.
Autodesk is currently evaluating the impact of SFAS
133 on its financial statements and related disclosures.