Autodesk 2013 Annual Report Download - page 142

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dollars and Australian dollars. These instruments have maturities between one to twelve months in the future. Autodesk does
not enter into derivative instrument transactions for trading or speculative purposes.
The bank counterparties in all contracts expose Autodesk to credit-related losses in the event of their nonperformance.
However, to mitigate that risk, Autodesk only contracts with counterparties who meet the Company's minimum requirements
under its counterparty risk assessment process. Autodesk monitors ratings, credit spreads and potential downgrades on at least a
quarterly basis. Based on Autodesk's on-going assessment of counterparty risk, the Company will adjust its exposure to various
counterparties. Autodesk generally enters into master netting arrangements, which reduce credit risk by permitting net
settlement of transactions with the same counterparty. However, Autodesk does not have any master netting arrangements in
place with collateral features.
Foreign currency contracts designated as cash flow hedges
Autodesk uses foreign currency contracts to reduce the exchange rate impact on a portion of the net revenue or operating
expense of certain anticipated transactions. These contracts are designated and documented as cash flow hedges. The
effectiveness of the cash flow hedge contracts is assessed quarterly using regression analysis as well as other timing and
probability criteria. To receive cash flow hedge accounting treatment, all hedging relationships are formally documented at the
inception of the hedge and the hedges are expected to be highly effective in offsetting changes to future cash flows on hedged
transactions. The gross gains and losses on these hedges are included in “Accumulated other comprehensive (loss) income” and
are reclassified into earnings at the time the forecasted revenue or expense is recognized. In the event the underlying forecasted
transaction does not occur, or it becomes probable that it will not occur, Autodesk reclassifies the gain or loss on the related
cash flow hedge from “Accumulated other comprehensive (loss) income” to “Interest and other income, net” in the Company's
Consolidated Financial Statements at that time.
The net notional amount of these contracts was $359.8 million at January 31, 2013 and $419.6 million at January 31,
2012. Balances presented below are presented as net settled. Outstanding contracts are recognized as either assets or liabilities
on the balance sheet at fair value. The majority of the net gain of $2.8 million remaining in “Accumulated other comprehensive
(loss) income” as of January 31, 2013 is expected to be recognized into earnings within the next twelve months.
Derivatives not designated as hedging instruments
Autodesk uses foreign currency contracts which are not designated as hedging instruments to reduce the exchange rate
risk associated primarily with foreign currency denominated receivables and payables. These forward contracts are marked-to-
market at the end of each fiscal quarter with gains and losses recognized as “Interest and other income, net.” These derivative
instruments do not subject the Company to material balance sheet risk due to exchange rate movements because gains and
losses on these derivative instruments are intended to offset the gains or losses resulting from the settlement of the underlying
foreign currency denominated receivables and payables. The net notional amounts of these foreign currency contracts were
$78.4 million at January 31, 2013 and $75.1 million at January 31, 2012.
In addition to these foreign currency contracts, Autodesk holds derivative instruments issued by privately held companies,
which are not designated as hedging instruments. These derivatives consist of certain conversion options on the convertible
debt securities held by Autodesk and an option to acquire a privately held company. These derivatives are recorded at fair value
as of each balance sheet date and are recorded in “Other assets.” Changes in the fair values of these instruments are recognized
in income as “Interest and other income, net.”
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