Autodesk 2008 Annual Report Download - page 137

AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
alleviate adverse tax consequences to Autodesk employees, the Company informed affected employees that it
would participate in 409A compliance programs offered by these tax jurisdictions. These compliance programs
allow the Company to pay the taxes due on these discounted options on behalf of its employees. During the first
quarter of fiscal year 2008, Autodesk’s Board of Directors approved the payment of these taxes. The Company
recorded $13.7 million of employee tax expenses during fiscal 2008.
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 is 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 revenue 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, upgrades
and crossgrades, product revenue for Advanced Systems sales wherein software is bundled with
hardware components, and revenue from Autodesk Buzzsaw on-demand collaboration software and
service. Revenue from upgrades is generated under the Autodesk Upgrade Program and Autodesk
Crossgrade 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;
this is referred to as a crossgrade.
Autodesk’s product license revenue from distributors and resellers is generally recognized at the
time title to Autodesk’s product passes to the distributor or reseller, provided all other criteria for
revenue recognition are met. Autodesk establishes reserves for product returns based on historical
experience of actual product returns, estimated channel inventory levels, the timing of new product
introductions, channel sell-in for applicable markets and other factors. These reserves are recorded as a
direct reduction of revenue and accounts receivable at the time the related revenue is recognized.
Other Revenue
Other revenue includes revenue from consulting, training, Autodesk Developers Network and
Advanced Systems customer support, and is recognized over time, as the services are performed.
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2008 Annua
l Report