Autodesk 2007 Annual Report Download - page 169

109
2007 Annual Report
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Income Taxes (Continued)
payable relating to the repatriation of prior year foreign earnings and the accrual of $11.6 million of
current Federal taxes relating to the repatriation of current year foreign earnings.
• Autodesk recognized an income tax benefit of $12.5 million relating to the DRD Legislation. Of
this amount, $10.6 million related to foreign withholding taxes previously accrued which were
no longer due as part of the repatriation of foreign earnings under the DRD Legislation, and $1.9
million related to an Internal Revenue Service (“IRS”) technical correction of the DRD Legislation.
• As a result of the Company’s resolution and closure of its Franchise Tax Board (“FTB”) audits for
fiscal 2000 and 2001, as well as the closure and lapse of the statute of limitations with respect to
certain Federal and foreign tax years, Autodesk recognized income tax benefits of approximately
$10.0 million.
During fiscal 2005, Autodesk recognized the following tax items:
• Autodesk recognized an income tax benefit of $15.5 million relating to the DRD Legislation. This
DRD Legislation, which was signed into law during the third quarter of fiscal 2005 as part of the
American Jobs Creation Act of 2004, allowed for the repatriation of certain foreign dividends at
a rate lower than the 35% Federal statutory rate. Because Autodesk believed that it would be
able to repatriate foreign earnings under this DRD Legislation, the deferred tax liability which was
previously accrued on prior year foreign earnings was reduced, which resulted in a $15.5 million
income tax benefit. This income tax benefit related to the difference between the taxes previously
accrued 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 of the Company’s resolution and closure of its 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 an income tax benefit
of approximately $8.9 million during fiscal 2005.
• 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
believed that it would 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 was approximately
$96 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 recognition. However, the Company
has determined that a portion of these unrecognized tax benefits will be recognized in connection
with the Company’s analysis of the effect of FIN 48 as of the beginning of fiscal 2008. As a result
of the adoption of FIN 48, Autodesk will record $19.5 million of unrecognized tax benefits related
to the aforementioned reorganization, with a corresponding increase in the beginning balance
of retained earnings as of February 1, 2008. See Note 1, “Business and Summary of Significant
Accounting Policies,” for further discussion of FIN 48.