Autodesk 2004 Annual Report Download - page 55

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Inventories
Inventories consisted of the following as of January 31:
2004 2003
(in thousands)
Raw materials and finished goods ............................... $13,875 $ 9,851
Demonstration inventory, net ................................... 3,490 2,433
$17,365 $12,284
Inventories are stated at the lower of standard cost (determined on the first-in, first-out method) or
market. Appropriate consideration is given to excess and obsolete inventory levels in evaluating lower of
cost or market.
Computer Equipment, Software, Furniture and Leasehold Improvements
Computer equipment, software and furniture are depreciated using the straight-line method over the
estimated useful lives of the assets, which range from two to five years. Leasehold improvements are
amortized on a straight-line basis over the shorter of the estimated useful life or the lease term. Depreciation
expense was $34.3 million in fiscal 2004, $31.6 million in fiscal 2003 and $26.3 million in fiscal 2002.
Costs incurred for computer software developed or obtained for internal use are capitalized for
application development activities and immediately expensed for preliminary project activities and post-
implementation activities.
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, production costs (programming and testing) are capitalized.
Certain acquired software-technology rights are also capitalized. Capitalized software costs are amortized
using the ratio of current gross revenues for a product to the total of current and anticipated future gross
revenues for that product, but not less than on a straight-line basis over the estimated economic life of the
product, which range from 12 months to seven years. Amortization expense, which is included as a
component of cost of revenues, was $15.5 million in fiscal 2004, $16.9 million in fiscal 2003 and $15.7 million
in fiscal 2002.
Purchased technologies and capitalized software and the related accumulated amortization at
January 31 were as follows (in thousands):
2004 2003
Purchased technologies ......................................... $133,041 $ 133,029
Capitalized software ............................................. 20,875 18,444
153,916 151,473
Less: Accumulated amortization ................................. (134,538) (121,348)
Purchased technologies and capitalized software, net ......... $ 19,378 $ 30,125
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. Business and Summary of Significant Accounting Policies (Continued)
45