Autodesk 2002 Annual Report Download - page 45

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AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Autodesk uses derivative instruments to manage its earnings and cash flow exposures to fluctuations in
foreign currency exchange rates. Under its risk management strategy, Autodesk uses foreign currency forward
and option contracts to manage its exposures of underlying assets, liabilities and other obligations, which exist as
part of the ongoing business operations. These foreign currency instruments by policy have maturities of less
than three months and settle before the end of each quarterly period. Generally, Autodesk’s practice is to hedge a
majority of its short-term foreign exchange transaction exposures. Contracts are primarily denominated in
European and Asian currencies, and Autodesk does not enter into any foreign exchange derivative instruments
for trading or speculative purposes.
Forwards
Autodesk’s forward contracts, which are not designated as hedging instruments under SFAS 133, have
average maturities of 90 days or less. The forwards are used to reduce the exchange rate risk associated primarily
with receivables and payables. Forward contracts are marked-to-market at the end of each reporting period, with
gains and losses recognized as other income or expense to offset the gains or losses resulting from the settlement
of the underlying foreign currency denominated receivables and payables.
The notional amounts of foreign currency contracts were $45.2 million at January 31, 2002 and $36.6
million at January 31, 2001. While the contract or notional amount is often used to express the volume of foreign
exchange contracts, the amounts potentially subject to credit risk are generally limited to the amounts, if any, by
which the counterparties’ obligations under the agreements exceed the obligations of Autodesk to the
counterparties. Gains resulting from foreign currency transactions were not material in fiscal 2002, 2001 and
2000.
Options
In addition to the forward contracts, Autodesk utilizes foreign currency option contracts to reduce the
exchange rate impact on the net revenue of certain anticipated transactions. These option contracts, which are
designated and documented as cash flow hedges and qualify for hedge accounting treatment under SFAS 133,
have maturities of less than three months and settle before the end of each fiscal quarter. Autodesk’s financial
exposure is generally limited to the amount paid for the options.
The notional amounts of foreign currency option contracts were $2.7 million at January 31, 2002 and $2.3
million at January 31, 2001. Gains, if any, from the effective portion of the option contracts, as determinable
under SFAS 133, are recognized as net revenues, while the ineffective portion of the gain is recorded as other
income. During fiscal 2002, Autodesk recognized net settlement gains of $0.8 million as net revenues. Amounts
associated with net settlement gains totaling $0.3 million were recorded as other income during fiscal 2002.
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