Autodesk 2009 Annual Report Download - page 159

AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Forwards and Options
Under its risk management strategy, Autodesk uses derivative instruments to manage its short-term
exposures to fluctuations in foreign currency exchange rates which exist as part of ongoing business operations.
Autodesk’s general practice is to use forward and option contracts to hedge a majority of transaction exposures
denominated in euros, Japanese yen, Swiss francs, British pounds and Canadian dollars. These foreign currency
instruments have maturities between one to 12 months in the future. Autodesk does not enter into any foreign
exchange derivative instruments for trading or speculative purposes.
Autodesk utilizes foreign currency option collar contracts or forwards to reduce the exchange rate impact on
a portion of the net revenue or operating expenses of certain anticipated transactions. These option and forward
contracts are designated and documented as cash flow hedges and qualify for hedge accounting treatment under
SFAS 133. For cash flow hedges, derivative gains and losses included in comprehensive income are reclassified
into earnings at the time the forecasted revenue or expense is recognized. The notional amount of these contracts
was $276.7 million at January 31, 2009 and $131.8 million at January 31, 2008, and the critical terms were
generally the same as those of the underlying exposure. Gains and losses, if any, from the effective portion of
these contracts, as determinable under SFAS 133, are recognized as net revenue or operating expenses, while the
ineffective portion of these contract is recorded in interest and other income, net. There were $14.7 million net
settlement losses recorded during fiscal 2009; there were no net settlement losses recorded during fiscal 2008 and
2007. There were $23.2 million, $0.2 million and $0.2 million net settlement gains recorded during fiscal 2009,
2008 and 2007, respectively. For fiscal 2009, the amount reclassified to earnings from other comprehensive
income was $8.4 million. In accordance with SFAS 133, unsettled contracts are recognized as either assets or
liabilities on the balance sheet and recognized at fair value.
In addition to the cash flow hedges described above, forward contracts which are not designated as hedging
instruments under SFAS 133, are used to reduce the exchange rate risk associated primarily with receivables and
payables. Forward contracts are marked-to-market at the end of each reporting period, with gains and losses
recognized as other income or expense to offset the gains or losses resulting from the settlement of the
underlying foreign currency denominated receivables and payables. The notional amounts of foreign currency
contracts were $28.3 million at January 31, 2009 and $66.9 million at January 31, 2008. While the contract or
notional amount is often used to express the volume of foreign exchange contracts, the amounts potentially
subject to credit risk are generally limited to the amounts, if any, by which the counterparties’ obligations under
the agreements exceed the obligations of Autodesk to the counterparties.
Amounts associated with the cost of the options, which were recorded in interest and other income, net,
totaled $4.8 million, $0.7 million and $0.6 million during fiscal 2009, 2008 and 2007, respectively.
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