Autodesk 2013 Annual Report Download - page 107

Autodesk determined that there was no impairment of goodwill for the M&E reporting unit during the year ended January 31,
2013.
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 changes in circumstances indicate the
carrying values of such assets may not be recoverable. We consider the following factors important in determining when to
perform an impairment review: significant under-performance of a business or product line relative to budget; shifts in business
strategies which affect the continued uses of the assets; significant negative industry or economic trends; and the results of past
impairment reviews. When such events or changes in circumstances occur, we assess recoverability of these assets.
We assess recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the
assets are expected to generate. If impairment indicators were present based on our undiscounted cash flow models, which
include assumptions regarding projected cash flows, we would perform a discounted cash flow analysis to assess impairments
on long-lived assets. Variances in these assumptions could have a significant impact on our conclusion as to whether an asset is
impaired or the amount of any impairment charge. Impairment charges, if any, result in situations where any fair values of these
assets are less than their carrying values.
In addition to our recoverability assessments, we routinely review the remaining estimated useful lives of our long-lived
assets. Any reduction in the useful life assumption will result in increased depreciation and amortization expense in the quarter
when such determinations are made, as well as in subsequent quarters.
We will continue to evaluate the values of our long-lived assets in accordance with applicable accounting rules. As
changes in business conditions and our assumptions occur, we may be required to record impairment charges.
Income Taxes. We currently have $165.0 million of net deferred tax assets, primarily a result of tax credits, net
operating losses, and timing differences for reserves, accrued liabilities, stock options, deferred revenue, purchased
technologies and capitalized intangibles, partially offset by the establishment of U.S. deferred tax liabilities on unremitted
earnings from certain foreign subsidiaries, deferred tax liabilities associated with tax method change on advanced payments and
valuation allowances against U.S. and Canadian deferred tax assets. We perform a quarterly assessment of the recoverability of
these net deferred tax assets and believe that we will generate sufficient future taxable income in appropriate tax jurisdictions to
realize the net deferred tax assets. Our judgments regarding future profitability may change due to future market conditions and
other factors, including intercompany transfer pricing adjustments. Any change in future profitability may require material
adjustments to these net deferred tax assets, resulting in a reduction in net income in the period when such determination is
made. We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the
jurisdictions in which we conduct our business. It is possible that these positions may be challenged by jurisdictional tax
authorities and may have a significant impact on our effective tax rate.
Stock-Based Compensation. We measure stock-based compensation cost at the grant date fair value of the award, and
recognize expense on a straight-line basis over the requisite service period, which is generally the vesting period. We estimate
the fair value of certain stock-based payment awards (including grants of stock options and employee stock purchases related to
the employee stock purchase plan) using the Black-Scholes-Merton option-pricing model. The determination of the fair value
of a stock-based award on the date of grant using the Black-Scholes-Merton option-pricing model is affected by our stock price
on the date of grant as well as assumptions regarding a number of complex and subjective variables. These variables include
our expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise
behaviors, the risk-free interest rate for the expected term of the award and expected dividends. The variables used in the model
are reviewed on a quarterly basis and adjusted, as needed. Share-based compensation cost for restricted stock is measured on
the closing fair market value of our commons stock on the date of grant. The value of the portion of the award that is ultimately
expected to vest is recognized as expense in our Consolidated Statements of Operations.
Legal Contingencies. As described in Part I, Item 3, “Legal Proceedings” and Part II, Item 8, Note 8, “Commitments
and Contingencies,” in the Notes to Consolidated Financial Statements, we are periodically involved in various legal claims
and proceedings. We routinely review the status of each significant matter and assess our potential financial exposure. If the
potential loss from any matter is considered probable and the amount can be reasonably estimated, we record a liability for the
estimated loss. Because of inherent uncertainties related to these legal matters, we base our loss accruals on the best
information available at the time. As additional information becomes available, we reassess our potential liability and may
revise our estimates. Such revisions could have a material impact on future quarterly or annual results of operations.
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2013 Annual Report