Autodesk 2010 Annual Report Download - page 166

AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Derivatives Not Designated as Hedging Instruments
Amount and Location of Gain (Loss) Recognized in
Income on Derivative
For the fiscal year ended January 31, 2010
Foreign exchange contracts ............................. $0.9 Interest and other income, net
Note 3. Fair Value Measurements
Fair value is an exit price, representing the amount that would be received upon the sale of an asset, or the
amount paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that market participants would use
in pricing an asset or liability. As a basis for considering such assumptions, Autodesk uses a three-tier value
hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such
as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are
observable either directly or indirectly in active markets; and (Level 3) unobservable inputs in which there is
little or no market data, which require Autodesk to develop its own assumptions. Whenever possible, Autodesk
uses observable market data, and relies on unobservable inputs only when observable market data is not
available, when determining fair value. On a recurring basis, Autodesk measures at fair value certain financial
assets and liabilities, which consist of cash equivalents, marketable securities and foreign currency contracts.
Autodesk’s cash equivalents and marketable securities are primarily classified within Level 1 or Level 2 of
the fair value hierarchy because they are valued primarily using quoted market prices, or alternative pricing
sources and models utilizing market observable inputs with reasonable levels of price transparency.
The Company’s investments held in the International Fund at January 31, 2010 are designated as Level 3
securities. The Company conducted its fair value assessment of the International Fund using Level 2 and Level 3
inputs. Management has reviewed the International Funds’ underlying securities portfolio which is substantially
comprised of term deposits, money market funds, U.S. treasury bills and commercial paper. These securities are
issued by highly-rated institutions. Normally, the Company would classify such investments within Level 2 of
the fair value hierarchy. Management evaluated the fair value of its unit interest in the International Funds,
considering risk of collection, timing and other factors. As a result of such evaluation, the Company has
classified its holdings in the International Fund within Level 3 of the fair value hierarchy. These assumptions are
inherently subjective and involve significant management judgment. Autodesk’s investments in auction rate
securities are classified within Level 3 because they are valued using a pricing model, and some of the inputs to
this model are unobservable in the market.
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