Autodesk 2009 Annual Report Download - page 122

Our historical 28% ownership interest in Hanna Strategies, accounted for under Accounting Principles
Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock,” and FASB
Interpretation No. 35, “Criteria for Applying the Equity Method of Accounting for Investments in Common
Stock,” resulted in a loss from unconsolidated subsidiary representing our 28% ownership interest in Hanna
Strategies’ results of operations through January 2, 2008, when we acquired the remaining 72%.
Provision for Income Taxes
We account for income taxes and the related accounts under the liability method in accordance with
Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). Deferred
tax liabilities and assets are determined based on the difference between the financial statement and tax bases of
assets and liabilities, using enacted rates expected to be in effect during the year in which the basis differences
reverse.
On February 1, 2007 we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109,” (“FIN 48”) which clarifies the accounting for uncertainty
in tax positions. Under FIN 48, companies are required to recognize the benefit from a tax position only if it is
“more likely than not” that the tax position would be sustained upon audit based solely on the technical merits of
the tax position. FIN 48 clarified how a company would measure the income tax benefits from the tax positions
that are recognized, provides guidance as to the timing of the derecognition of previously recognized tax benefits,
and describes the methods for classifying and disclosing the liabilities within the financial statements for any
unrecognized tax benefits. The provisions of FIN 48 were effective as of the beginning of our 2008 fiscal year,
with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained
earnings. Based on our assessment, we recorded an increase to opening retained earnings during the first quarter
of fiscal 2008 for tax benefits not previously recognized of $26.4 million as a result of adopting FIN 48.
Our effective tax rate was 27% and 24% during fiscal 2009 and 2008, respectively. Our effective tax rate
increased 3% from fiscal 2008 to fiscal 2009 primarily due to non-deductible goodwill impairment and
in-process research and development expenses.
Our effective tax rate was 24% and 21% during fiscal 2008 and 2007, respectively. Our effective tax rate
increased 3% from fiscal 2007 to fiscal 2008 primarily as a result of a reduction in tax benefits, as a percentage
of pre-tax earnings, from the lapse of statute of limitations or audit closures and the phase-out of extraterritorial
income exclusion.
Our future effective tax rate may be materially impacted by the amount of benefits and charges from tax
amounts associated with our foreign earnings that are taxed at rates different from the Federal statutory rate,
research credits, state income taxes, SFAS 123R, FIN 48, FAS 141R, U.S. Manufacturer’s deduction, closure of
statute of limitations or settlement of tax audits, changes in valuation allowances and changes in tax law.
At January 31, 2009, we had net deferred tax assets of $133.7 million. We believe that we will generate
sufficient future taxable income in appropriate tax jurisdictions to realize these assets.
For additional information regarding our income tax provision, see Note 3, “Income Taxes,” in the Notes to
Consolidated Financial Statements.
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