Autodesk 2011 Annual Report Download - page 137

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AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
months in the future. Autodesk does not enter into any transactions for derivative instruments for trading or
speculative purposes.
The bank counterparties in all contracts expose Autodesk to credit-related losses in the event of their
nonperformance. However, to mitigate that risk, Autodesk only contracts with counterparties who meet the
Company’s minimum requirements under its counterparty risk assessment process. Autodesk monitors ratings,
credit spreads and potential downgrades on at least a quarterly basis. Based on Autodesk’s on-going assessment
of counterparty risk, the Company will adjust its exposure to various counterparties. Autodesk does not have any
master netting arrangements in place with collateral features.
Cash Flow Hedges
Autodesk utilizes foreign currency contracts to reduce the exchange rate impact on a portion of the net
revenue or operating expense of certain anticipated transactions. These contracts are designated and documented
as cash flow hedges. The effectiveness of the cash flow hedge contracts is assessed quarterly using regression
analysis as well as other timing and probability criteria. To receive cash flow hedge accounting treatment, all
hedging relationships are formally documented at the inception of the hedge and the hedges are expected to be
highly effective in offsetting changes to future cash flows on hedged transactions. The gross gains and losses on
these hedges are included in “Accumulated other comprehensive income (loss)” and are reclassified into earnings
at the time the forecasted revenue or expense is recognized. In the event the underlying forecasted transaction
does not occur, or it becomes probable that it will not occur, Autodesk reclassifies the gain or loss on the related
cash flow hedge from “Accumulated other comprehensive income (loss)” to “Interest and other income
(expense), net” in the Company’s Consolidated Financial Statements at that time.
The notional amount of these contracts was $345.5 million at January 31, 2011 and $239.1 million at
January 31, 2010. Outstanding contracts are recognized as either assets or liabilities on the balance sheet at fair
value. The entire net loss of $0.8 million remaining in “Accumulated Other Comprehensive Income (Loss)” as of
January 31, 2011 is expected to be recognized into earnings within the next twelve months.
Balance Sheet Hedges
In addition to the cash flow hedges described above, Autodesk uses contracts which are not designated as
hedging instruments to reduce the exchange rate risk associated primarily with foreign currency denominated
receivables and payables. Forward contracts are marked-to-market at the end of each fiscal quarter with gains
and losses recognized as “Interest and other income, net”. These derivative instruments do not subject the
Company to material balance sheet risk due to exchange rate movements because gains and losses on these
derivative instruments are intended 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
$56.1 million at January 31, 2011 and $19.6 million at January 31, 2010.
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