Autodesk 2005 Annual Report Download - page 64

Autodesk recognizes revenue as follows: Product sales, which include software licenses and any related
hardware and peripherals, are recognized at the time of shipment to our distributors, resellers and direct
customers, providing all other criteria for recognition of revenue have been met. In addition to product sales,
Autodesk recognizes maintenance revenues from our subscription program and hosted service revenues ratably
over the contract periods. Customer consulting and training revenues are recognized as the services are
performed. In arrangements that include multiple software products and/or services, the Company allocates the
total arrangement fee among each of the deliverables using the residual method, under whichrevenue is allocated
to undelivered elements based on vendor-specific objective evidence (“VSOE”) of fair value of such undelivered
elements and the residual amounts of revenue are allocated to delivered elements. VSOE is the price charged
when that element is sold separately or the price as set by management with the relevant authority.
For reporting purposes, Autodesk reports revenue generated from the subscription program separately as
maintenance revenue on the Consolidated Statements of Income. Revenue from all other sales types including
product, consulting, training, hardware support, and hosting services, are reported as License and Other Revenue
on the Consolidated Statements of Income. Revenue from the sales of our training, support and hosting services
are immaterial for all periods presented.
With the exception of contracts with certain distributors, sales contracts do not contain specific product-
return privileges. However, Autodesk permits its distributors and resellers to return product in 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 on historical
experience of actual product returns and price adjustment rates, estimated channel inventory levels, the timing of
new product introductions, channel sell-in for applicable markets 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 $14.8 million in fiscal
2005, $11.7 million in fiscal 2004 and $9.8 million in fiscal 2003.
Net Income Per Share
Basic net income per share is computed using the weighted average number of common shares outstanding
during the period. Diluted net income 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 December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 — revised 2004,
“Share-Based Payment,” (“SFAS 123R”) which replaces Statement of Financial Accounting Standards No. 123
(“SFAS 123”) and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” 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
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. Business and Summary of Significant Accounting Policies (Continued)
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