Autodesk 2005 Annual Report Download - page 34

targeted efficiencies with a lower level of involuntary terminations than originally anticipated; consequently, the
total charges under the fiscal 2004 restructuring plan were $27.5 million, as compared to the $37.0 million
originally estimated.
During fiscal 2005, we recorded net restructuring charges of $26.7 million of which $19.8 million related to
employee termination costs under the fiscal 2004restructuring plan, $3.9 millionrelated to the closure offacilities
under the fiscal 2004 restructuring plan and $3.0 million related to office closures effected during previous years.
The office closure costs were based upon the projected rental payments through the remaining terms of the
underlying operating leases, offset by projected sublease income. The projected sublease income amounts were
calculated by using information provided by third-party real estate brokers as well as management judgments
and were based on assumptions for each of the real estate markets where the leased offices were located. If
real estate markets worsen and we are not able to sublease the properties as expected, we will record additional
expenses in the period when such rental payments are made. This situation occurred during each of fiscal 2005,
2004 and 2003; we therefore recorded additional charges as a result of the inability to sublease abandoned offices.
If the real estate markets subsequently improve, and we are able to sublease the properties earlier or at more
favorable rates than projected, we will reverse a portion of the underlying restructuring accruals, which will result
in increased net income in the period when such sublease becomes effective.
Stock Option Accounting. We do not record compensation expense when stock option grants are awarded to
employees at exercise prices equal to the fair marketvalue of Autodeskcommon stockon the date of grant. We disclose
in Note 1, “Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial
Statements the expense consistent with the method of Statement of Financial Accounting Standards No. 123,
“Accounting for Stock Issued to Employees” (“SFAS 123”). The alternative fair value accounting provided for under SFAS
123 requires use of option valuation models which require the input of highly subjective assumptions, including the
expected life of the option and expected future volatility. Changes in the subjective input assumptions can materially
affect the fair value estimate. Had we recorded compensation expense fromstockoption grants, our net income would
have been substantially less. Upon adoption of Statement of Financial Accounting Standards No. 123 — revised 2004,
“Share-Based Payment,” which replaces SFAS 123 and supersedes APB Opinion No. 25, “Accounting for Stock Issued
to Employees” (“APB 25”) in the third quarter of fiscal 2006 (see “Recently Issued Accounting Standards” below), our
operating margins and net income will be adversely affected.
Legal Contingencies. As described in Item 3, “Legal Proceedings” and Note 5, “Commitments and
Contingencies”, in the Notes to Consolidated Financial Statements, we are periodically involved in various legal
claims and proceedings. We routinely review the status of each significant matter and assess our potential
financial exposure. If the potential loss from any matter is considered probable and the amount can be reasonably
estimated, we record a liability for the estimated loss. Because of inherent uncertainties related to these legal
matters, we base our loss accruals on the best information available at the time. As additional information
becomes available, we reassess our potential liability and may revise our estimates. Such revisions could have
a material impact on future quarterly or annual results of operations.
Recently Issued Accounting Standards
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 — revised 2004,
“Share-Based Payment,” (“SFAS 123R”) which replaces SFAS 123 and supersedes APB 25. SFAS 123R requires the
measurement of all employee share-based payments to employees, including grants of employee stock options,
using a fair-value based method and the recording of such expense in our consolidated statements of income.
This statement is effective for reporting periods beginning after June 15, 2005. We are required to adopt SFAS
123R starting in the third quarter of fiscal 2006. The pro forma disclosures previously permitted under SFAS 123
will no longer be an alternative to financial statement recognition. See Note 1, “Business and Summary of
Significant Accounting Policies,” in the Notes to Consolidated Financial Statements for the pro forma net income
(loss) and net income (loss) per share amounts for fiscal 2005, 2004 and 2003, as if we had used a fair-value
based method similar to the methods required under SFAS 123R to measure compensation expense for employee
stock awards. Although we have not yet determined whether the adoption of SFAS 123R will result in amounts
that are similar to the current pro forma disclosures under SFAS 123, we are evaluating the requirements under
SFAS 123R and expect the adoption to have a significant adverse impact on our consolidated statements of income
and net income per share.
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