Autodesk 2007 Annual Report Download - page 146

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AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. Business and Summary of Significant Accounting Policies (Continued)
The weighted average estimated fair values were derived from use of the Black–Scholes model with
the following assumptions:
Fiscal 2006 Fiscal 2005
Stock Option
Plans ESP Plan
Stock Option
Plans ESP Plan
Range of expected volatilities. . . . . . . . 0.40 – 0.49 0.35 – 0.39 0.43 –0.55 0.43
Range of expected lives (in years) . . . . 4.1 – 4.3 0.5 – 2.0 4.3 – 5.0 0.5 – 2.0
Expected dividends . . . . . . . . . . . . . . . . . 0.0% 0.0% 0.1% –0.4% 0.1% – 0.4%
Range of risk-free interest rates . . . . . . 3.82% – 4.48% 3.14% – 4.18% 3.30% – 3.70% 1.02% – 2.63%
See Note 3, “Employee and Director Benefit Plans,” for further discussion of Autodesk’s stock-based
compensation plans.
Revenue Recognition
Autodesk recognizes revenue when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the price is fixed or determinable, and collection is probable.
Autodesk’s revenue recognition policies are in compliance with the provisions of the American Institute of
Certified Public Accountants’ Statement of Position 97-2, “Software Revenue Recognition” (“SOP 97-2”) as
amended, and SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements.”
For multiple element arrangements that include software products, Autodesk allocates the sales
price among each of the deliverables using the residual method, under which revenue is allocated to
undelivered elements based on their vendor-specific objective evidence (“VSOE”) of fair value. VSOE is
the price charged when an element is sold separately or a price set by management with the relevant
authority. If Autodesk does not have VSOE of the undelivered element, revenue recognition is deferred
on the entire sales arrangement until all elements are delivered. Revenue recognition for significant lines
of business are discussed further below
Autodesk’s assessment of likelihood of collection is also a critical element in determining the timing
of revenue recognition. If collection is not probable, the revenue will be deferred until the earlier of when
collection is deemed probable or cash is received.
License and other revenues are comprised of two components: (1) all forms of product license revenue
and (2) other revenue:
All Forms of Product License Revenue
Product license revenue includes: software license revenue from the sale of new seats
and upgrades, product revenue for Advanced Systems sales wherein software is bundled with
hardware components, and revenue from Autodesk Buzzsaw on-demand collaboration software
and service. Revenues from upgrades are generated under the Autodesk Upgrade Program.
Autodesk’s existing customers who are using a currently supported version of a product can
upgrade to the latest release of the product by paying a separate fee at the time of upgrade that
is based on the number of versions being upgraded. An existing customer also has the option to
upgrade to a discipline-specific or 3D product, which generally has a higher price, for a premium
fee; we refer to this as a crossgrade.