Autodesk 2012 Annual Report Download - page 97

• Grow. We believe sufficient opportunity remains in our PC-based software business and intend to continue to grow
• Transform. At the same time we grow our desktop software business, we are migrating many of our products to the
the cloud. We are also developing new capabilities that are enabled by the cloud such as collaborative PLM and on
• Expand. We believe that the combination of cloud, mobile, and social computing affords us the opportunity to expand
Expanding our geographic coverage is another key element of our growth strategy. While emerging economies are
important for all global businesses, we believe they hold special opportunity for Autodesk. Much of the growth in the world’s
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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, 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 service 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 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, 2012 we had $447.2 million of short and long-term marketable securities.
Marketable securities are stated at fair value. As described in Note 2, “Financial Instruments,” 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 convertible debt securities because an active market does not exist for these securities which have been
issued by private corporations. 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.
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2012 Annual Report