Autodesk 2002 Annual Report Download - page 43

AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
training revenues are recognized as the services are performed, and revenues from post contract customer support
and other related services are recognized ratably as the obligations are fulfilled, or when the related services are
performed. Vendor specific objective evidence of the fair value of the elements contained in our software license,
subscription and hosting arrangements are based on the price determined by management having the relevant
authority.
With the exception of contracts with certain distributors, sales contracts do not contain specific product-
return privileges. However, Autodesk permits its distributors and resellers 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. These reserves are based upon channel inventory levels and the timing of new product introductions and
other factors. These allowances are recorded as direct reductions of revenue and accounts receivable at the time
the related revenue is recognized. Product return reserves were $20.6 million at January 31, 2002 and $17.8
million at January 31, 2001.
Advertising Expenses
Advertising costs are expensed as incurred. Total advertising expenses incurred were $13.8 million in fiscal
2002, $15.3 million in fiscal 2001 and $18.3 million in fiscal 2000.
Net Income Per Share
Basic earnings per share is computed using the weighted average number of common shares outstanding
during the period. Diluted earnings per share is computed using the combination of the dilutive effect of stock
options and the weighted average number of common shares outstanding. Autodesk has no potentially dilutive
securities other than stock options.
Recently Issued Accounting Standards
During July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 141, “Business Combinations” (“SFAS 141”). This Statement requires all business combinations
be accounted for using the purchase method accounting and redefines goodwill and other intangibles that should
be recognized separate from goodwill. SFAS 141 is effective for all business combinations initiated after
June 30, 2001. Both the Buzzsaw and Media 100 acquisitions were accounted for pursuant to SFAS 141.
During July 2001, the Financial Accounting Standards Board also issued Statement of Financial Accounting
Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). This Statement requires, among other
things, that goodwill not be amortized, but be tested for impairment at least annually. Application of SFAS 142 is
required immediately for business combinations completed after June 30, 2001; however, for transactions
completed prior to this date, Autodesk plans to adopt the provisions of SFAS 142 on February 1, 2002. The
beneficial pre-tax impact resulting from the adoption of the goodwill non-amortization provision of SFAS 142
will be less than $5.0 million per quarter. Autodesk recently completed an assessment of the annual goodwill
impairment test pursuant to SFAS 142 and believes that none of the goodwill balances as of January 31, 2002 are
impaired.
During August 2001, the Financial Accounting Standards Board also issued Statement of Financial
Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”
(“SFAS 144”). SFAS 144 is effective at the start of fiscal 2003 and supercedes Statement of Financial
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