Autodesk 2010 Annual Report Download - page 127

We recorded an impairment charge of $21.0 million during the first quarter of fiscal 2010 representing the
entire goodwill balance of our M&E segment as of April 30, 2009. This goodwill balance related to our M&E
segment’s fourth quarter fiscal 2009 acquisition of substantially all of the assets of Softimage. In May 2009, we
concluded that an impairment of goodwill had occurred as of April 30, 2009, due to revisions to our revenue and
cash flow projections in response to the significant and sustained revenue declines we were experiencing in all
segments and geographies in the first quarter of fiscal 2010. The revenue and cash flow projections were
substantially impacted for all segments, and our M&E segment was the only segment which had a fair value of
its future discounted cash flows that fell below the carrying value of its net assets.
We recorded an impairment charge of $128.2 million affecting the fourth quarter of fiscal 2009 representing
the entire goodwill balance associated with our Media and Entertainment (“M&E”) segment as of October 31,
2008. During the fourth quarter of fiscal 2009, revenue and cash flow projections for all segments were
substantially impacted by the sharp downturn in the global economy and in our business. Our M&E segment was
the only segment which had a current fair value of its future discounted cash flows that fell below the carrying
value of its assets. Should our revenue and cash flow projections decline significantly in the future, additional
impairment charges may be recorded to goodwill.
As of January 31, 2010, a hypothetical 10% decrease in the fair value of our reporting units would not have
an impact on the carrying value of goodwill, nor result in impairment of goodwill. See further discussion of this
impairment charge in Note 1, “Business and Summary of Significant Accounting Policies,” in the Notes to the
Consolidated Financial Statements.
Realizability of Long-Lived Assets. We assess the realizability of our long-lived assets and related
intangible assets, other than goodwill, annually during the fourth fiscal quarter, or sooner should events or
changes in circumstances indicate the carrying values of such assets may not be recoverable. We consider the
following factors important in determining when to perform an impairment review: significant under-
performance of a business or product line relative to budget; shifts in business strategies which affect the
continued uses of the assets; significant negative industry or economic trends; and the results of past impairment
reviews.
In assessing the recoverability of these long-lived assets, we first determine their fair values, which are
based on assumptions regarding the estimated future cash flows that could reasonably be generated by these
assets. If impairment indicators were present based on our undiscounted cash flow models, which include
assumptions regarding projected cash flows, we would discount the cash flows to assess impairments on long-
lived assets. Variances in these assumptions could have a significant impact on our conclusion as to whether an
asset is impaired or the amount of any impairment charge. Impairment charges, if any, result in situations where
any fair values of these assets are less than their carrying values.
In addition to our recoverability assessments, we routinely review the remaining estimated useful lives of
our long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and
amortization expense in the quarter when such determinations are made, as well as in subsequent quarters.
We will continue to evaluate the values of our long-lived assets in accordance with applicable accounting
rules. As changes in business conditions and our assumptions occur, we may be required to record impairment
charges.
Income Taxes. We currently have $146.1 million of net deferred tax assets, primarily a result of tax
credits, net operating losses, and timing differences for reserves, accrued liabilities, stock options, purchased
technologies and capitalized software, partially offset by the establishment of U.S. deferred tax liabilities on
unremitted earnings from certain foreign subsidiaries and acquired intangibles and valuation allowances against
California and Canadian deferred tax assets. We perform a quarterly assessment of the recoverability of these net
deferred tax assets and believe that we will generate sufficient future taxable income in appropriate tax
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