Autodesk 2006 Annual Report Download - page 104

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Forwards
Autodesk’s forward contracts, which are not designated as hedging instruments under Statement of
Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,”
(“SFAS 133”), have average maturities of less than three months. The forwards are used to reduce the exchange
rate risk associated primarily with receivables and payables. Forward contracts are marked-to-market at the end
of each reporting period, with gains and losses recognized as other income or expense to offset the gains or
losses resulting from the settlement of the underlying foreign currency denominated receivables and payables.
The notional amounts of foreign currency contracts were $10.4 million at January 31, 2006 and $36.2 million
at January 31, 2005. While the contract or notional amount is often used to express the volume of foreign exchange
contracts, the amounts potentially subject to credit risk are generally limited to the amounts, if any, by which
the counterparties’ obligations under the agreements exceed the obligations of Autodesk to the counterparties.
Options
In addition to the forward contracts, Autodesk utilizes foreign currency option collar contracts to reduce
the exchange rate impact on the net revenue of certain anticipated transactions. These option contracts, which
are designated and documented as cash flow hedges and qualify for hedge accounting treatment under SFAS 133,
have maturities of less than three months. For cash flow hedges, derivative gains and losses included in
comprehensive income are reclassified into earnings at the time the forecasted revenue is recognized or the
option expires. The cost of these foreign currency option collars are recorded as other current assets and other
accrued liabilities on the Company’s Consolidated Balance Sheets.
The notional amounts of foreign currency option contracts were $77.1 million at January 31, 2006 and
$52.4 million at January 31, 2005, and the critical terms were generally the same as those of the underlying
exposure. Gains, if any, from the effective portion of the option contracts, as determinable under SFAS 133, are
recognized as net revenues, while the ineffective portion of the option contract is recorded in interest and other
income, net. There were $2.8 million net settlement gains recorded as net revenues during fiscal 2006 and
$0.5 million net settlement losses during fiscal 2005 recorded as net revenues. Amounts associated with the cost
of the options, which were recorded in interest and other income, net, totaled $0.8 million during both fiscal 2006
and fiscal 2005.
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. Financial Instruments (Continued)
58