Autodesk 2006 Annual Report Download - page 107

Significant components of Autodesk’s deferred tax assets and liabilities are as follows:
January 31,
2006 2005
Purchased technology and capitalized software .................. $ 9.5 $ 28.7
Reserves for product returns and bad debts ..................... 5.4 5.9
Tax loss carryforwards ............................................ 147.2 103.8
Accrued compensation and benefits ............................. 15.5 11.6
Fixed assets ....................................................... 11.8 11.0
Research and development credit carryforwards ................. 42.4 27.9
Foreign tax credit carryforwards .................................. 30.2 16.8
Capitalized R&D expenditures .................................... 11.2 10.4
Other accruals not currently deductible for tax .................. 9.7 8.0
Other ............................................................. 4.8 1.8
Total deferred tax assets ......................................... 287.7 225.9
Less: valuation allowance ......................................... (2.2) (2.4)
Net deferred tax assets ........................................... 285.5 223.5
Unremitted earnings of foreign subsidiaries ...................... (91.9) (104.1)
Total deferred tax liability ........................................ (91.9) (104.1)
Net deferred tax assets ........................................... $193.6 $119.4
The valuation allowance decreased by $0.2 million in fiscal 2006, $21.4 million in fiscal 2005 and increased
by $11.9 million in fiscal 2004. During fiscal 2005, Autodesk re-assessed the realizability of certain deferred tax
assets related to stock option deductions that had not been previously recognized. As a result of U.S. operating
results, as well as U.S. jurisdictional forecasts of pretax operating results, Autodesk believes these deferred tax
assets are realizable based on the “more likely than not” standard required for recognition in accordance with
Statement of Financial Accounting Standards No. 109. Accordingly, during fiscal 2005, the Company reduced the
valuation allowance relating to tax benefits of stock option deductions by $21.1 million and credited additional
paid in capital by an equal and offsetting amount. As of January 31, 2005, Autodesk no longer records a valuation
allowance relating to tax benefits of stock option deductions. Approximately $21.1 million of the valuation
allowance at January, 31 2004 related to tax benefits of stock option deductions.
No provision has beenmade for federal income taxes on unremitted earnings ofcertain ofAutodesk’s foreign
subsidiaries (cumulatively $133.0 million at January 31, 2006) because Autodesk plans to reinvest such earnings
for the foreseeable future. At January 31, 2006, the unrecognized deferred tax liability for these earnings was
approximately $46.0 million.
Realization of the Company’s net deferred tax assets of $193.6 million is dependent upon the Company
generating approximately $607 million of future taxable income in appropriate tax jurisdictions to obtain benefit
from the reversal of temporary differences, net operating loss carryforwards and tax credits. The amount of
deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable
income are reduced.
Cash payments (refunds) for income taxes were approximately $44.2 million in fiscal 2006, $16.5 million in
fiscal 2005, and ($19.3) million in fiscal 2004.
During fiscal 2006, the increase in net operating loss carryforwards related primarily to stock option
deductions, the benefit of which has been offset against additional paid in capital. Autodesk has $567.3 million
of cumulative federal tax loss carryforwards and $151.8 million of cumulative state tax loss carryforwards, which
may be available to reduce future income tax liabilities in certain jurisdictions. The federal tax loss carryforwards
2006 Annual Report
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5. Income Taxes (Continued)
61