Autodesk 2006 Annual Report Download - page 97

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Inventories
Inventories consisted of the following as of January 31:
2006 2005
Raw materials and finished goods, net ............................ $11.9 $8.2
Demonstration inventory, net ..................................... 2.3 4.3
$14.2 $12.5
Inventories are stated at the lower of standard cost (determined on the first-in, first-out method) or market.
Autodesk evaluates quantities on hand and estimates excess and obsolete inventory for purposes of establishing
necessary reserves.
Computer Equipment, Software, Furniture and Leasehold Improvements
Computer equipment, software and furniture are depreciated using the straight-line method over the
estimated useful lives of the assets, which range from two to five years. Leasehold improvements are amortized
on a straight-line basis over the shorter of the estimated useful life or the lease term. Depreciation expense was
$33.8 million in fiscal 2006, $36.2 million in fiscal 2005 and $34.3 million in fiscal 2004.
Computer equipment, software, furniture, leasehold improvements and the related accumulated
depreciation at January 31 were as follows:
2006 2005
Computer equipment, software and furniture, at cost ................ $208.0 $ 191.7
Leasehold improvements, at cost ...................................... 35.0 32.6
243.0 224.3
Less: Accumulated depreciation ....................................... (181.6) (154.7)
Computer equipment, software, furniture and leasehold
improvements, net .................................................. $ 61.4 $ 69.6
Costs incurred for computer software developed or obtained for internal use are capitalized for application
development activities and immediately expensed for preliminary project activities and post-implementation
activities. These capitalized costs are amortized over the expected useful life of the software, which is generally
three years.
Software Development Costs
Software development costs incurred prior to the establishment of technological feasibility are included
in research and development expenses. Autodesk defines establishment of technological feasibility as
the completion of a working model. Software development costs incurred subsequent to the establishment
of technological feasibility through the period of general market availability of the products are capitalized,
if material.
Purchased Technologies and Capitalized Software
Purchased technologies and capitalized software costs are amortized over the estimated economic life of
the product, which ranges from one to seven years. Capitalized software assets were fully amortized and written-
off as of January 31, 2006. Amortization expense, which is included as a component of cost of revenues, was
$9.9 million in fiscal 2006, $15.7 million in fiscal 2005 and $15.5 million in fiscal 2004.
2006 Annual Report
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. Business and Summary of Significant Accounting Policies (Continued)
51