Autodesk 2011 Annual Report Download - page 99

determinable payments, regardless of whether they collect payment from their customers. Our policy also
presumes that we have no significant performance obligations in connection with the sale of our product licenses
by our distributors and resellers to their customers. If we were to change any of these assumptions or judgments,
it could cause a material increase or decrease in the amount of revenue that we report in a particular period.
Marketable Securities. At January 31, 2011 we had $391.8 million of short and long-term marketable
securities. Marketable securities are stated at fair value. As described in Note 3, “Fair Value Measurements,” in
the Notes to the Consolidated Financial Statements, we estimate the fair value of our marketable securities each
quarter. Fair value is defined as an exit price, representing the amount that would be received from the sale of an
asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants at the measurement date. When identical or similar assets are
traded in active markets, the level of judgment required to estimate their fair value is relatively low. This is
generally true for our cash and cash equivalents and the majority of our marketable securities, which we consider
to be Level 1 assets and Level 2 assets. However, determining the fair value of marketable securities when
observable inputs are not available (Level 3) requires significant judgment. For example we use a discounted
cash flow model to estimate the fair value of our auction rate securities; because we have determined that the
market for those securities is inactive. This determination is based on the fact that due to a decrease in liquidity in
the global credit markets, the regularly scheduled auctions for the auction rate securities we hold have generally
failed since August 2007. These assumptions are inherently subjective and involve significant management
judgment. Whenever possible, we use observable market data and rely on unobservable inputs only when
observable market data is not available, when determining fair value.
Business Combinations. We allocate the purchase price of acquired companies to assets and liabilities, as
well as to in-process research and development based upon their estimated fair values at the acquisition date. The
purchase price allocation process requires us to make significant estimates and assumptions, especially at the
acquisition date with respect to intangible assets and deferred revenue obligations.
Although we believe the assumptions and estimates we have made are reasonable, they are based in part on
historical experience and information obtained from the management of the acquired companies and are
inherently uncertain. Examples of critical estimates used in valuing certain of the intangible assets we have
acquired or may acquire in the future include but are not limited to: future expected cash flows from sales,
maintenance agreements and acquired developed technologies; the acquired company’s trade name and customer
relationships as well as assumptions about the period of time the acquired trade name and customer relationships
will continue to be used in the combined company’s product portfolio; expected costs to develop the in-process
research and development into commercially viable products and estimated cash flows from the projects when
completed; and discount rates.
Goodwill. We test goodwill for impairment annually in our fourth fiscal quarter or sooner should events or
changes in circumstances indicate potential impairment. When assessing goodwill for impairment, we use
discounted cash flow models which include assumptions regarding projected cash flows. Variances in these
assumptions could have a significant impact on our conclusion as to whether goodwill is impaired, or the amount
of any impairment charge. Impairment charges, if any, result from instances where the fair values of net assets
associated with goodwill are less than their carrying values. As changes in business conditions and our
assumptions occur, we may be required to record impairment charges.
As of January 31, 2011, 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. For further discussion see
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
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