Autodesk 2005 Annual Report Download - page 62

Impairment of Long-Lived Assets
Annually or sooner, as circumstances dictate, Autodesk assesses the recoverability of its long-lived assets
by comparing the undiscounted net cash flows associated with such assets against their respective carrying
values. Impairment, if any, is based on the excess of the carrying value over the fair value. There was no
impairment of long-lived assets during the year ended January 31, 2005.
During fiscal 2004 Autodesk identified an impairment related to certain intangible assets acquired in
relation to the acquisition of the software division of Media 100, Inc. (“Media 100”) attributed to the Discreet
Segment. Autodesk wrote down the remaining net book value of these intangibles by $1.8 million to an amount
equal to the fair value of the Media 100-based products. This charge was recorded in cost of license and other
revenues for the Discreet Segment of Autodesk.
In addition to the recoverability assessments, Autodesk routinely reviews the remaining estimated useful
lives of its long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and
amortization expense in the quarter when such determinations are made, as well as in subsequent quarters.
Deferred Tax Assets
Deferred tax assets arise primarily from net operating losses, tax credits, reserves and timing differences for
purchased technologies and capitalized software offset by the establishment of U.S. deferred tax liabilities on
unremitted earnings from certain foreign subsidiaries. They are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances
are established when necessary to reduce the deferred tax assets to the amount expected to be realized.
Employee Stock Compensation
Autodesk accounts for employee stock options using the intrinsic value method of accounting in accordance
with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), as
permitted by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”
(“SFAS 123”). As such, no compensation expense is recognized in Autodesk’s consolidated statements of income,
other than for stock awards that have exercise prices less than the fair market value of Autodesk’s common stock
at the date of grant.
Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation —
Transition and Disclosure” (“SFAS 148”) amends the disclosure requirements of SFAS 123 to require more
prominent disclosures in both the annual and interim financial statements regarding the method of accounting
for stock-based employee compensation and the effect of the method used on reported results.
The following table illustrates the effect on net income and net income per share if Autodesk had applied
the fair value recognition provisions of SFAS 123, as amended by SFAS 148, to stock-based employee
compensation. For purposes of computing pro forma net income, the estimated fair value of options is amortized
to expense on a straight-line basis over the options’ vesting period.
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. Business and Summary of Significant Accounting Policies (Continued)
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