Autodesk 2005 Annual Report Download - page 71

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Legislation, the deferred tax liability which was previously accrued on prior year foreign earnings was reduced,
which resulted in a $15.5 million one-time income tax benefit during fiscal 2005. This one-time income tax benefit
relates to the difference between the taxes previously provided on the earnings of a foreign subsidiary at the
federal statutory tax rate and the lower rate afforded under the new DRD Legislation. As a result, the deferred
tax liability previously accrued on these earnings was reduced, which increased the Company’s total net deferred
tax asset balance. Also during fiscal 2005, the Company accrued $19.0 million of U.S. and foreign deferred taxes
relating to current year foreign earnings which the Company intends to repatriate in fiscal 2006 under this DRD
Legislation. The net tax expense represents the Company’s intention to repatriate approximately $248 million
of foreign earnings accumulated through fiscal 2005 under this DRD Legislation.
As a result of the Company’s resolution and closure of its Internal Revenue Service (“IRS”) audit for fiscal
2001 as well as the closure of certain state and foreign tax years, and the lapse of the statute of limitations with
respect to certain federal, state, and foreign tax years, Autodesk recognized a current income tax benefit of
approximately $8.9 million during fiscal 2005, which reduced accrued income taxes.
Also during fiscal 2005, following certain business changes, Autodesk completed an internal reorganization
of the ownership of Autodesk Canada. As a result of the reorganization, Autodesk believes that it will be able
to claim U.S. tax deductions for the remaining unamortized portion of the purchase price from the March 1999
acquisition of Discreet (now Autodesk Canada). The amount of the potential deferred tax asset arising from this
reorganization is approximately $96.2 million, reflecting future U.S. tax amortization deductions of goodwill and
other intangible assets. Autodesk determined that, at the present time, it is not probable that these tax benefits
will be realized and accordingly has not yet recognized these benefits. Instead, the tax benefits arising from this
reorganization will be recognized if and when the tax treatment is verified with tax authorities or such other
factors occur that would permit a probable confidence level to be achieved.
During the fiscal year 2004, the Company recognized an income tax benefit of $19.7 million due to a favorable
resolution of an industry-wide matter surrounding the Company’s Foreign Sales Corporation for the fiscal years
ended 1993 through 1998. In connection with the refund of these tax payments previously made, the Company
received payment and recognized interest income of $4.2 million during fiscal 2004.
During the fourth quarter of fiscal 2004, the statute of limitations lapsed with respect to the fiscal year
ended 2000. As a result of the Company’s resolution of its IRS audit and closure for that year, the Company
recognized an income tax benefit of approximately $7.0 million for items dealing primarily with various
international tax matters and research and development tax credits.
In fiscal 2003, the Company resolved its IRS audit for the fiscal years ended 1997-1999, and the statute of
limitations lapsed with respect to these years in the fourth quarter of fiscal 2003. The closure of these years
resulted in a current income tax benefit of approximately $61.7 million which related primarily to various
international tax matters and research and development tax credits. Also in the fourth quarter, the Company
provided an additional $57.9 million in U.S. deferred income taxes on previously permanently reinvested foreign
earnings to reflect a potential repatriation of such foreign earnings to meet expected U.S. cash needs, including
the Company’s current stock repurchase program. The impact of these events was a net income tax benefit of
$3.8 million.
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Income Taxes (Continued)
59