Autodesk 2010 Annual Report Download - page 126

Product Returns Reserves. We permit our distributors and resellers to return products up to a percentage
of prior quarter purchases. The product returns reserve is based on historical experience of actual product returns,
estimated channel inventory levels, the timing of new product introductions and promotions, channel sell-in for
applicable markets and other factors.
Our product returns reserves were $11.8 million at January 31, 2010 and $12.5 million at January 31, 2009.
Product returns as a percentage of applicable revenue were 5.2% in fiscal 2010, 3.6% in fiscal 2009 and 3.5% in
fiscal 2008. During fiscal year 2010 and 2009, we recorded additions to our product returns reserves of $42.9
million and $53.1 million, respectively, which reduced our revenue.
Marketable Securities. At January 31, 2010 we had $287.5 million of short and long-term marketable
securities. We review our investments in marketable securities quarterly for indicators of other-than-temporary
impairment. This determination requires significant judgment. In making this determination, we employ a
systematic methodology that considers available quantitative and qualitative evidence. If the cost of an
investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and
extent to which the fair value is less than cost, and our intent and ability to hold the investment. We also consider
specific adverse conditions related to the financial health of, and business outlook for, the sponsor, including
industry and sector performance, operational and financing cash flow factors, and rating agency actions. Once a
decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to our
Consolidated Statements of Operations. This impairment results in a new cost basis in the investment recorded in
our Consolidated Balance Sheets. If market, industry, and/or sponsor conditions deteriorate, we may incur future
impairments.
Determining the fair value of marketable securities that are not actively traded requires significant
judgment. At January 31, 2010 we had an investment in The Reserve International Liquidity Fund (the
“International Fund”), a money market fund with an estimated fair value of $10.0 million. During the third
quarter of fiscal 2009, the International Fund ceased redemptions after net asset values of the funds decreased
below $1 per share. This occurred as a result of the International Fund revaluing its holdings of debt securities
issued by Lehman Brothers, which filed for Chapter 11 bankruptcy on September 15, 2008, and the resulting
unusually high redemption requests on the International Fund. A third party court appointed supervisor is
overseeing, but not managing, the accounting and payment administration of the non U.S.-based International
Fund. Our investment in the International Fund is not currently liquid, and in the event we need to access these
funds, we will not be able to do so. However, based on currently available information, we expect to recover
substantially all of our current holdings, net of reserves, from the International Fund within the next 12 months.
Accordingly, the investment in the International Fund is classified in current “Marketable Securities” in the
Consolidated Balance Sheets.
In addition, at January 31, 2010, we owned two auction rate securities with an estimated fair value of $7.6
million. Our auction rate securities are variable rate debt instruments that have underlying securities with
contractual maturities greater than ten years and interest rates that were structured to reset at auction every 28
days. The securities, which met our investment guidelines at the time the investments were made, have failed to
settle in auctions since August 2007 and have earned a premium interest rate since that time. While we expect to
recover substantially all of our current holdings, net of reserves, in the auction rate securities, we cannot predict
when this will occur or the amount we will receive. Due to the lack of liquidity of these investments, they are
included in non-current “Marketable securities” in the Consolidated Balance Sheets.
Goodwill. We test goodwill for impairment annually in our fourth fiscal quarter or sooner should events or
changes in circumstances indicate potential impairment. When assessing goodwill for impairment, we use
discounted cash flow models which include assumptions regarding projected cash flows. Variances in these
assumptions could have a significant impact on our conclusion as to whether goodwill is impaired, or the amount
of any impairment charge. Impairment charges, if any, result from instances where the fair values of net assets
associated with goodwill are less than their carrying values. As changes in business conditions and our
assumptions occur, we may be required to record impairment charges.
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