Autodesk 2011 Annual Report Download - page 98

and integration challenges and may, in certain instances, negatively impact our operating margins. We
continually review these trade-offs in making decisions regarding acquisitions. We currently anticipate that we
will acquire products, technology and businesses as compelling opportunities that promote our strategy become
available. The pace at which we make such investments will vary depending upon our business needs, the
availability of suitable sellers and technology, and our own financial condition.
Our strategy depends upon a number of assumptions, including that we will be able to continue making our
technology available to mainstream markets; leverage our large global network of distributors, resellers, third-
party developers, customers, educational institutions, and students; improve the performance and functionality of
our products; and adequately protect our intellectual property. If the outcome of any of these assumptions differs
from our expectations, we may not be able to implement our strategy, which could potentially adversely affect
our business. For further discussion regarding these and related risks see Part I, Item 1A, “Risk Factors.”
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting
principles. In preparing our Consolidated Financial Statements, we make assumptions, judgments and estimates
that can have a significant impact on amounts reported in our Consolidated Financial Statements. We base our
assumptions, judgments and estimates on historical experience and various other factors that we believe to be
reasonable under the circumstances. Actual results could differ materially from these estimates under different
assumptions or conditions. We regularly reevaluate our assumptions, judgments and estimates. Our significant
accounting policies are described in Note 1, “Business and Summary of Significant Accounting Policies,” in the
Notes to Consolidated Financial Statements. We believe that of all our significant accounting policies, the
following policies involve a higher degree of judgment and complexity. Accordingly, these are the policies we
believe are the most critical to aid in fully understanding and evaluating our financial condition and results of
operations.
Revenue Recognition. We recognize revenue when persuasive evidence of an arrangement exists, delivery
has occurred or services have been rendered, the price is fixed or determinable and collection is probable.
However, determining whether and when some of these criteria have been satisfied often involves assumptions
and judgments that can have a significant impact on the timing and amount of revenue we report.
For multiple element arrangements that include software products, we allocate the sales price among each of
the deliverables using the residual method, under which revenue is allocated to undelivered elements based on
their vendor-specific objective evidence (“VSOE”) of fair value. VSOE is the price charged when an element is
sold separately or a price set by management with the relevant authority. If we do not have VSOE of an
undelivered software license, we defer revenue recognition on the entire sales arrangement until all elements for
which we do not have VSOE are delivered. If we do not have VSOE for undelivered maintenance or services, the
revenue for the arrangement is recognized over the longest contractual period in the arrangement. We are
required to exercise judgment in determining whether VSOE exists for each undelivered element based on
whether our pricing for these elements is sufficiently consistent.
Our assessment of likelihood of collection is also a critical factor in determining the timing of revenue
recognition. If we do not believe that collection is probable, the revenue will be deferred until the earlier of when
collection is deemed probable or payment is received.
Our indirect channel model includes both a two-tiered distribution structure, where distributors sell to
resellers, and a one-tiered structure where Autodesk sells directly to resellers. Our product license revenue from
distributors and resellers are generally recognized at the time title to our product passes to the distributor, in a
two-tiered structure, or reseller, in a one-tiered structure, provided all other criteria for revenue recognition are
met. This policy is predicated on our ability to estimate sales returns, among other criteria. We are also required
to evaluate whether our distributors and resellers have the ability to honor their commitment to make fixed or
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