Autodesk 2011 Annual Report Download - page 147

AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The valuation allowance increased by $3.9 million, $14.3 million and $8.5 million in fiscal 2011, 2010 and
2009, respectively. The fiscal 2011 and fiscal 2010 increase was primarily related to California deferred taxes.
During the first quarter of fiscal 2010, the State of California enacted legislation significantly altering California
tax law. As a result of the newly enacted legislation, Autodesk expects that in fiscal years 2012 and beyond,
income subject to tax in California will be less than under prior tax law and accordingly, deferred tax assets are
less likely to be realized. The fiscal 2009 increases were primarily related to Canadian deferred taxes, which
Autodesk does not expect to realize.
No provision has been made for federal income taxes on unremitted earnings of certain of Autodesk’s
foreign subsidiaries (cumulatively $1,030.5 million at January 31, 2011) because Autodesk plans to reinvest such
earnings for the foreseeable future. At January 31, 2011, the net unrecognized deferred tax liability for these
earnings was approximately $314.5 million.
Realization of the Company’s net deferred tax assets of $147.5 million is dependent upon the Company’s
ability to generate future taxable income in appropriate tax jurisdictions to obtain benefit from the reversal of
temporary differences, net operating loss carryforwards and tax credits. The amount of deferred tax assets
considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced.
As of January 31, 2011, Autodesk had $16.9 million of cumulative federal tax loss carryforwards and
$351.4 million of cumulative state tax loss carryforwards, which may be available to reduce future income tax
liabilities in certain jurisdictions. These federal and state tax loss carryforwards will expire beginning fiscal 2012
through fiscal 2021 and fiscal 2012 through fiscal 2031, respectively.
As of January 31, 2011, Autodesk had $70.4 million of cumulative federal research tax credit carryforwards,
$37.6 million of cumulative California state research tax credit carryforwards and $47.9 million of cumulative
Canadian federal tax credit carryforwards, which may be available to reduce future income tax liabilities in the
respective jurisdictions. The federal credit carryforwards will expire beginning fiscal 2012 through fiscal 2031,
the state credit carryforwards may reduce future California income tax liabilities indefinitely, and the Canadian
tax credit carryforwards will expire beginning fiscal 2023 through fiscal 2031. Autodesk also has $119.1 million
of cumulative foreign tax credit carryforwards, which may be available to reduce future U. S. tax liabilities. The
foreign tax credit will expire beginning fiscal 2018 through fiscal 2021.
Utilization of net operating losses and tax credits may be subject to an annual limitation due to ownership
change limitations provided in the Internal Revenue Code and similar state provisions. This annual limitation
may result in the expiration of net operating losses and credits before utilization.
As a result of certain business and employment actions and capital investments undertaken by Autodesk,
income earned in certain countries is subject to reduced tax rates through fiscal 2019. The income tax benefits
attributable to the tax status of these business arrangements are estimated to be zero in fiscal 2011, zero in fiscal
2010 and $0.3 million ($0.001 basic net income per share) in fiscal 2009. The income tax benefits were offset
partially by accruals of U.S. income taxes on undistributed earnings, among other factors.
During fiscal 2011, Autodesk recognized income tax expense of approximately $2.1 million primarily
related to a change in the expected future tax rates and the increase of a valuation allowance against California
deferred taxes of $4.9 million partially offset by the closure of audits and other decreases in uncertain tax
positions of $2.8 million.
During fiscal 2010, Autodesk recognized income tax expense of approximately $17.7 million primarily
related to a change in the expected future tax rates and the establishment of a valuation allowance against
81