Autodesk 2009 Annual Report Download - page 141

AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. As a result, 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 for which we do not have VSOE 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 seat licenses,
upgrades and crossgrades, product revenue for Advanced Systems sales wherein software is bundled
with hardware components, and revenue from 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 an industry-
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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