Autodesk 2003 Annual Report Download - page 55

AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 3. Financial Instruments
Fair Values of Financial Instruments
Estimated fair values of financial instruments are based on quoted market prices. The carrying amounts and
fair value of Autodesk’s financial instruments are as follows:
January 31, 2003 January 31, 2002
Cost Fair value Cost Fair value
(In thousands)
Cash and cash equivalents ........................ $186,377 $186,377 $157,687 $157,687
Marketable securities ........................... 219,756 224,672 343,621 346,924
Forward foreign currency contracts ................ 694 694 68 68
Foreign currency option contracts .................. 205 205 199 199
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 Euros,
Swiss francs, Canadian dollars, British pounds and Japanese yen, 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 $32.0 million at January 31, 2003 and $45.2
million at January 31, 2002. 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 2003, 2002 and
2001.
Options
In addition to the forward contracts, Autodesk utilizes foreign currency option collar 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. For cash flow hedges,
derivative gains and losses included in comprehensive income are reclassified into earnings at the time the
forecasted revenue is recognized or the option expires. Autodesk’s financial exposure is generally limited to the
amount paid for the options.
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