Autodesk 2004 Annual Report Download - page 59

certain instances, such as during periods of product transition and during update cycles. In addition, for
certain distributors in Europe, we offer incremental discounts, or price adjustments, ranging from 1% to 4%
for certain qualifying sales.
Autodesk establishes reserves for product return and price adjustments. These reserves are based upon
channel inventory levels and the timing of new product introductions, channel sell-in for applicable
markets, historical experience of actual product returns and price adjustment rates and other factors. These
reserves are recorded as a direct reduction of revenue and accounts receivable at the time the related
revenue is recognized.
Shipping and Handling Costs
Shipping and handling costs are included in cost of revenues for all periods presented.
Advertising Expenses
Advertising costs are expensed as incurred. Total advertising expenses incurred were $11.7 million in
fiscal 2004, $9.8 million in fiscal 2003 and $13.8 million in fiscal 2002.
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
In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest
Entities.” FIN 46 expands upon existing accounting guidance that addresses when a company should
include in its financial statements the assets, liabilities and activities of another entity. A variable interest
entity is a corporation, partnership, trust or any other legal structure used for business purposes that either
(a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient
financial resources for the entity to support its activities. FIN 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk of loss from the variable
interest entity’s activities or is entitled to receive a majority of the entity’s residual returns or both. The
consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31,
2003. The consolidation requirements apply to older entities in the first fiscal year or interim period ending
after December 15, 2003. Disclosure requirements apply to any financial statements issued after January 31,
2003. The adoption of this statement had no effect on Autodesk’s consolidated financial position, results of
operations or cash flows.
In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of
Statement 133 on Derivative Instruments and Hedging Activities,” (“SFAS 149”). SFAS 149 amends and
clarifies the accounting for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under Statement of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging Activities.” SFAS 149 is generally effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003.
Adoption of SFAS 149 did not have a material impact on the Company’s consolidated financial position,
results of operations or cash flows.
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. Business and Summary of Significant Accounting Policies (Continued)
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